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London businesses are more optimistic than six months ago about the prospects for the economy and for their own companies, but anxiety about the Eurozone crisis is straining hiring and investment plans, a London business survey by the Confederation of British Industry (CBI) and KPMG found.
The survey, which quizzed 264 companies, showed that 41% of respondents say they feel more optimistic about the economy over the next six months, seeing a sharp improvement from the previous survey in December (13%). Just under half (47%) of London firms say they feel more positive about their own six-month business prospects, up from 31% in December.
But this rise in optimism is tempered by concerns over the ongoing Eurozone crisis as the number of employers now freezing their recruitment has more than doubled to 51%, from 23% six months ago, with only 16% now hiring as normal, compared with 54% in the December survey.
A quarter of companies (24%) also plan to decrease their investment in IT, equipment, plant and machinery over the next six months, or make no investments at all in this area.
“In this milestone year for London, it’s great to see that the capital’s firms are more optimistic than six months ago, but the shadow cast by the Eurozone crisis continues hang over businesses and the economy,” said Sara Parker, CBI London region director. “Increased Eurozone anxiety means employers are reluctant to invest, take on new people or expand their businesses.”
But still the number of firms rating London as a good place to do business has increased to 86% from 83% six months ago. For small and medium-sized companies, the rise is even greater from 74% in December to 81%. At the same time, the number of respondents who believe that London’s position as a good place to do business will be at least the same or will have improved in five years has increased from 78% to 83%, the highest percentage since December 2006 (88%).
“It’s encouraging that the number of London companies rating the capital as a good place to do business has increased from six months ago, especially among smaller firms. The ease of access to global markets, talent pool and proximity to customers are factors which consistently impress companies based in the capital,” said Richard Reid, London Chairman of KPMG.