29 Jul, 2013

Firms plan to expand

More of London’s businesses plan to expand during the next year but fewer are planning to do so in the capital, according to the latest CBI/KPMG London Business Survey, published one year on from the London Games.

  • Businesses want Mayor to tackle high operating costs and housing shortages
  • Eurozone and access to credit worries ease amongst London businesses
  • Recruitment freeze thaws

High operating costs and housing shortages were highlighted as the biggest concerns by London’s firms.

Nearly two-thirds of London firms (62{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} compared with 53{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} in December) plan to expand during the next year. However there was a drop in the number wishing to do so in London (29{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} from 54{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} in December) and an increase in the number seeking to expand overseas – 45{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} from 27{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} last December.

The majority (92{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e}) of London businesses rated the capital as a good or very good place to do business compared with other global cities. But, as in the past two surveys, overall operating costs were cited as the main weakness. Housing was highlighted as the second most significant weakness, rising from third place in December. Transport was ranked third in the list of weaknesses.

The three strengths stayed the same as in the last survey: skills and talent pool; access to global markets; proximity to customers and clients.

Sara Parker, CBI Director London, said:

“It’s encouraging that more London firms plan to expand but worrying that fewer expect to do so in the capital.

“Some of the perennial challenges of doing business in the capital, like high operating costs, housing shortages and transport challenges, threaten to undermine investment confidence.

“This is a wake-up call – we need to make sure that London does not lose ground to global rivals.

“We urgently need to translate some of the good work that has been done on paper, in the Mayor’s 2020 vision, the Roads Task Force report and by the London Finance Commission, into action.”

Matt Lewis, London Partner for KPMG’s National Market practice, said:

“London firms need reassurance that the capital will still be a good place for them to operate in 2020 and this is particularly important for the vital SME community in the capital.

“With London’s population expected to grow to 10 million by 2030, businesses need to be confident that the infrastructure, particularly rail and airport capacity, will improve. The cost and availability of housing also needs major attention, especially for smaller businesses which need to attract skilled individuals to what is increasingly becoming a very expensive city to live in.

“London is a great place to do business but complacency is not an option – the competition is hot on its heels.”

In terms of the economic outlook, the impact of the Eurozone crisis was seen as less of a worry than in the December survey. Asked before the latest GDP figures, the majority of London businesses (56{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e}) said they felt ‘about the same’ regarding the prospects for the economy as in December, whereas 26{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} said they felt more optimistic and 18{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} more pessimistic.

When asked about the prospects for their own business 52{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} felt about the same as in the last survey, 40{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} felt more positive and only 9{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} felt more pessimistic.

When asked about their main concerns, London businesses highlight the lack of economic growth (65{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e}, up from 53{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} six months ago) followed by uncertainty about global economic prospects (53{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e}). The third most cited concern was the lack of a clear government strategy to deliver growth, cited by 47{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} (compared with 32{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} in December).

At the same time, businesses’ level of nervousness about the Eurozone fell from first place in the December survey to fourth in this one, while their concern about the availability of credit dropped to tenth place from fourth during the same period.

The number of businesses freezing recruitment dropped to 17{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e}, its lowest level in two years, down from 31{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} in December and 51{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} a year ago, but 68{6060b2de664e4eaa3e7b7e86961ce2c4bbd7a29b6c1097abf8257a4e5b07383e} of firms are still only hiring where essential.

London companies plan to spend relatively more on recruitment and training; product and process innovation; and IT plant and machinery, but less on land and buildings.
Credit: onrec.com

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