The second quarterly economic survey by London Chamber of Commerce and Industry (LCCI) reveals that London businesses continue to weather the storm in face of immense cost pressures and inflation.
Inflation continues to be the top concern for 66% of London businesses suggesting that the current national economic crisis remains on the top of mind for business owners. However, this figure is down from 73% last quarter.
LCCI’s quarterly economic survey, Capital 500 surveyed a total of 510 London business leaders at the end of Q2. The survey points to an encouraging rise in domestic demand for London businesses, with the balance for orders increasing for the first time in five quarters. One in five (22%) London firms said their orders had increased compared to the previous three months, up from 15% in Q1. 13% of companies said sales had increased compared to Q1 2023. 11% of London businesses reported an increase in export orders last quarter.
The second quarter of 2023 also saw an improvement in domestic sales for London businesses. 24% of companies in the capital said sales had risen in Q2, up slightly from 21% in Q1.
39% of London businesses expect their profitability and turnover to improve in the next 12 months. Cashflow also saw a positive development with 22% of firms reporting an increase over the last quarter, up from 19% in the first quarter.
However, London businesses are more likely to hold a negative view of the UK’s prospects with 44% predicting that the country’s economic growth will worsen. Energy costs are slightly less likely to have increased in the last three months compared to the three before, although the vast majority of businesses still report rising energy costs. More than two-thirds (69%) of London companies said their energy costs rose in Q2 2023 compared to the previous three months. This was down from 74% in the Q1 2023 Capital 500, although only 4% of businesses in the latest survey said their energy costs had fallen.
Around one in five (22%) London firms expect their workforce to grow in the next three months, unchanged from the Q1 2023 Capital 500. Encouragingly, only 5% think their employment levels will shrink. Larger businesses continued to be more upbeat on their staffing numbers in Q2 compared to micro firms (19%), with half of larger companies (51%) expecting their employment levels to grow in the coming three months.
Recruitment efforts by London businesses stalled for the first time in two years. The percentage of firms who said they had tried to recruit last quarter shrunk slightly from 25% to 23%, due to a smaller share of micro businesses seeking to hire new staff (19%). By contrast, two-thirds (66%) of larger companies sought to recruit in Q2, up from 61% in the Q1 2023 Capital 500.
Reacting to the findings of the report, Richard Burge, Chief Executive of London Chamber of Commerce and Industry (LCCI), said:
“LCCI’s quarterly economic survey shows yet again the resilience and entrepreneurial drive of the London business community despite the economic headwinds. There has been an uptick in business confidence with 24% of London businesses expecting London’s economy to improve in the next 12 months. With stronger government support, London could lead the national economic recovery. Stubborn inflation figures require supply side measures to keep up the recovery momentum.”
James Watkins, LCCI’s Head of Policy and Public Impact, said:
“Cost pressures remain for London businesses, with firms seeing higher bills from their supply chains. While energy and fuel costs have – somewhat – eased, most firms are still seeing increases compared to the previous quarter. London businesses point to several costs, including utilities, labour and energy, putting pressure on them to raise prices.
“Business confident has nevertheless continued to recover, with firms clearly more optimistic about their own prospects for the coming year. Company outlooks for the London economy have improved too, albeit at a slower pace.
“It is, however, important to note that our survey was conducted before the Bank of England raised rates again, with signs that inflation is not falling at the pace it was expected to. Businesses will want to see concrete policy steps that could help to reduce the upward pressures on inflation, which in turn would reduce the need for further monetary policy tightening.”
Find out more about London Chamber of Commerce and Industry at www.londonchamber.co.uk Scan the QR code to read the full Q2 Capital 500.