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The latest London Business Survey published by the Confederation of British Industry (CBI) and KPMG reveals that London businesses are more upbeat about the coming half-year, and while most firms still feel some impact from the recession, spending plans have improved on six months ago.
The survey shows that 53% are optimistic about their future business prospects, up from 47% six months ago. 58% of firms plan to expand their business in the next 12 months, with 32% of those planning to expand within London.
Most of the capital's senior executives (80%) say they think London is a good place to do business, which is in line with the previous two surveys conducted in October 2009 (86%) and April 2009 (80%).
However, firms are concerned about the impact of the new 50p rate of income tax. 57% believe it could stop businesses from choosing London as a base or staying in the UK in the long-term. The cost of doing business in the capital is seen as a weakness by 78% of firms, as is its transport system (46%).
Firms' investment plans are more positive than six months ago. 31% plan to increase spending on recruitment & training, IT infrastructure, equipment, plant & machinery and on product and process innovation. 34% plan to spend more on marketing and promotion. The only area where firms on balance expect to invest less is land & buildings.
Companies were asked to comment on the impact that Boris Johnson, the Mayor of London, has made in his second year in office. For the second year running, bosses thought the biggest impact the mayor has had is on improving London's reputation, and this was followed by transport and support to business. Areas where firms clearly felt there was room for improvement were housing, skills and the economy.
Concern about skills shortages is creeping back up the agenda for London businesses, with 44% saying they can't find enough skilled staff, up from 38% a year ago. This remains well below levels of concern seen before the recession however, when in March 2007, 74% of firms reported skills shortages.
85% of firms say that the poor quality and reliability of London's public transport system is still affecting their ability to do business. But firms are becoming more positive than they were about the capital's public transport system. In 2007, it was ranked as good or excellent by one-in-ten firms, while in this survey it was a one-in-four.
Nigel Bourne, Director of CBI London, said "there is a growing sense of optimism among London's businesses, with firms more upbeat about the coming six months. Even though most companies rate the capital as a good or very good place to do business, the cost of operating a business in London, the level of taxation and the transport system are all seen as denting its ability to compete on the world stage."
"After a second year in office, businesses think the Mayor is making a positive impact on people's perception of the city, and on its transport network. But neither he nor the government should be complacent. We must continue investing in London's vital infrastructure and ensure it can compete with other cities globally. Nurturing home-grown talent is also going to be important during the recovery."
To read the full report please click here