This year, for the sixth time, London Councils and London Chamber of Commerce and Industry (LCCI) have commissioned a local business survey of 1,369 London businesses. Polling for this unique survey was conducted by YouGov in summer 2022 at a time of growing economic uncertainty and against a backdrop of significant global events and national political upheaval.
The survey’s results show a dramatic deterioration in business confidence, with three-quarters of London businesses (75%) feeling less confident about the UK economy over the next 12 months than they were about the previous 12 months. The threat of COVID-19, which weighed heavily on businesses this time last year, has now been replaced by inflationary pressures which have seen the cost of doing business rise to unprecedented levels. What confidence businesses had that they were over the worst of the pandemic’s effects, seems now to have vanished.
Businesses in London were asked to identify the key challenges they are likely to face over the next twelve months, and 60% identified rising inflation as a key threat to economic activity. This was a standout response, almost double the next closest concerns on the lack of consumer spending and low turnover/ cash-flow issues, which were cited by 34% and 31% of London businesses respectively. Three quarters of businesses (75%) also said that they have seen an increase in operational costs in the last 12 months and these businesses report that the cost of raw materials and energy costs have risen the most, with a median rise of 64% and 137% respectively. A fifth of businesses having experienced energy price rises of over 200% in the previous 12 months.
As households react to these increased costs by reducing spending, the majority (68%) of London businesses have made operational changes, with 35% increasing prices and almost half (49%) making changes to their workforce.
Other top line findings from the report are:
- The labour market continues to be challenging, with half of businesses unable to find people interested in available roles (51%) and almost half (47%) finding applicants have insufficient skills.
- Consistent with the last two years, investing business rates into improving public transport is the biggest perceived priority for London companies (44%) followed by improving air quality and building more homes in the capital (both 32%).
- Brexit is still having an impact upon businesses, with half of businesses now experiencing supply chain issues (52%) and having less access to suitably skilled employees (49%)
- A higher proportion of businesses believe that cutting emissions is important (40%) than unimportant (33%), with large businesses most likely to believe in its importance (57%).
Cllr Darren Rodwell, London Councils Deputy Chair, said:
“Businesses faced unprecedented challenges during the pandemic and now the increasing cost of doing business, driven by rising energy costs and inflation, is putting businesses under further strain.
“Access to skills is a major concern for employers and business’ needs would be better supported by greater devolution of powers and funding to all UK regions. We also continue to work with Government to reform the Apprenticeship Levy as employers find the apprenticeship system does not work sufficiently for them currently.
“Meanwhile, London boroughs stand ready to work alongside Government to safeguard the future of our businesses, as we did during the pandemic when we distributed over 575,000 grants worth £3.4bn to London businesses.
“Boroughs will continue to champion businesses across the capital that make London such a vibrant and unique city to live in.”
Richard Burge, Chief Executive of London Chamber of Commerce and Industry, said:
“In recent months businesses have been battling to stay afloat against significantly hostile headwinds caused by the cost of doing business crisis, inflation and the threat of a recession. Having been disproportionately affected by the pandemic, businesses in London are facing a long, difficult winter and as a country we must do all we can to support them.
“The London Chamber appreciates that the current economic situation isn’t ideal and that there are no quick fixes, but we hope that the upcoming Autumn Statement outlines a road to recovery for businesses and actively seeks to restore macroeconomic stability and encourage the return of business confidence.”