London firms are less optimistic about the economy and business prospects this quarter, according to the latest CBI/KPMG London Business Survey.
The number of respondents saying they are more optimistic about the economy over the next six months has dropped from 59% three months ago to 42% this quarter.
Similarly, only two-fifths of firms (38%) are now more optimistic about business prospects, compared with nearly half (47%) last quarter.
The top concern for London firms is lack of economic growth, with regulatory pressures cited as the next biggest concern. Also highlighted for the first time this year is uncertainty over the UK’s role in Europe.
Nevertheless, the survey of 120 companies shows that business expansion plans remain robust, with nearly two-thirds of respondents (65%) planning to extend their operations over the coming year. Almost half (49%) plan to do so in London, an increase of 10% since the last survey, and the highest figure this year.
Lucy Haynes, CBI London Director, said: “Overall, London has had a good innings in 2014. Throughout the year, firms have been upbeat about the economy and their business prospects, but optimism has dipped recently against the backdrop of a sluggish Eurozone and increased geopolitical tensions.
“The capital’s businesses are raising concerns around the uncertainty of the UK’s role in Europe, so we must continue to explain why British membership of a reformed EU is important to jobs and growth in London and the rest of the country.
“London enjoys a fantastic international reputation, but to keep the city globally competitive it’s critical that action to free up land for house building is taken now. It’s also clear that supporting innovation and enterprise in the capital is a priority for business.”
Richard Reid, London Chairman of KPMG, said: “Despite political events starting to have an impact on confidence in the capital, it is encouraging to see that businesses aren’t backing down from their expansion and investment plans.
“Difficult as it is, it is important that businesses stay focused on their growth plans, over the next six months and do not get distracted by the potential political uncertainties as we head to the polls in May. We need London businesses to drive the economy forward if we are to continue to be the jewel in the crown of economic growth in Europe.
“Despite the cost of living and housing continuing to dominate the concerns for business owners in London, the fact that the great EU debate has made the list of the top five concerns in such a short space of time demonstrates what an important issue EU membership is.”
The capital’s international reputation continues to run high, with 82% of companies rating London as a good, or very good, place to do business, and 80% of businesses planning to stay in the city in the future.
In order to stimulate growth in the next five years, businesses want to see more support being given to small and medium-sized enterprise (SME) innovation and entrepreneurship (16%).
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Notes to Editors:
About the survey
The survey was carried out between 06 October and 24 October 2014. There were 120 responses.
Professional services was the largest sector, covering 34% of the total sample, followed by banking, finance and insurance (17%), information, communications and technology (11%), and hospitality, leisure and retail (9%).
54% of responses came from SMEs, defined as having a UK turnover of up to £10m. 13% of responses were from companies with a turnover of £100-500m.
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
About the CBI
Across the UK, the CBI speaks on behalf of 190,000 businesses of all sizes and sectors which together employ nearly 7 million people, about one third of the private sector-employed workforce. With offices in the UK as well as representation in Brussels, Washington, Beijing and Delhi, the CBI communicates the British business voice around the world.
Visit the Great Business Debate website - a CBI led campaign to help build public confidence in business.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.