Businesses need solid support and reassurance as Brexit negotiations proceed

Here’s what the LCCI had to say

The Government needs to work hard to ensure London has a solid economic foundation to meet the twin challenges of Brexit and an expanding population, London’s leading business group said today.

The latest economic survey, commissioned by London Chamber of Commerce and Industry, found that although businesses reported a boost in confidence and outlook for the year ahead there was also concern about cashflow as well as recruiting the right staff.

In making the negotiations, LCCI believes that the Government needs to recognise the uniqueness of London both in terms of its economic and infrastructure needs and its diverse workforce.

This would mean introducing a London Visa, working to mitigate the impact of business rates revaluation where most needed, committing to Crossrail 2 and recognising London as a key engine of the UK economy in its Industrial Strategy.

Chief Executive of LCCI, Colin Stanbridge said: “There are many signs of improvement; however, not all indicators are upbeat.”

“We need to ensure that London is well equipped to meet the challenges of Brexit and a population that is set to meet 10 million by 2030.”

“Above all, alongside efforts to support balanced growth across the UK, a new Industrial Strategy must recognise the role that London currently has and will continue to play as the engine of the UK economy.”

LCCI makes four key recommendations following the latest survey to help the Mayor and the Government ensure London businesses can feel confident and boost productivity during the negotiation period:

Recommendation 1: The Government’s finalised Industrial Strategy should contain a recognition of London as a key engine of the national economy with its extensive procurement and supply chain across the UK.  Efforts to generate balanced growth across the UK should not come at the expense of the capital; London strategic infrastructure projects should not face unnecessary delay.

Recommendation 2: The Mayor of London should champion a single issue ‘London Work Visa’ granting ‘indefinite leave to remain’ in the UK to existing EU National employees providing reassurance to current employees and their employers.

Recommendation 3: While welcome, the discretionary relief announced at the Budget will only be beneficial if it reaches the businesses most affected by the Business Rates revaluation. 

Government should look to ensure transparency on where, when and how much, relief has been allocated in local authority areas across the capital.  

Recommendation 4: A revised business case for the Crossrail 2 project is currently before the Department for Transport for consideration. The Government should move to ensure that accommodation is made within Parliamentary timetabling for a hybrid bill before 2019. 

Key findings from Capital 500 Q1 2017 survey include:

  • Domestic demand declined during Q1 2017, following an increase in the previous quarter, and remain negative overall, as more businesses reported a decline than an increase in both domestic sales and orders
  • Export demand saw the same proportion of businesses report an increase as a decrease. The balance figures for both export sales and orders remained unchanged from 2016’s final quarter, and continue to be at their lowest recorded Capital 500 level

Labour market:

  • Following an increase in the previous quarter, the Capital 500 employment figures dropped again during Q1 2017. The balance figure for businesses’ employment levels over the past three months decreased by 4 points, to a Capital 500 (joint) record low of -6 per cent
  • In contrast, expectations for the quarter ahead remained positive as, on balance, 3 per cent of businesses expect their workforce to grow

Recruitment and training:

  • The number of companies looking to invest in training continued to increase during Q1 2017
  • Of the companies looking to recruit, almost half (47 per cent) encountered difficulties finding sufficiently skilled candidates. Skilled manual/technical roles (50 per cent) and professional/managerial roles (43 per cent) continued to be the hardest to fill for recruiting Capital 500 companies
  • The most frequently recorded methods of acquiring new skills during the last three months were training existing staff (24 per cent, which is the same figure as in Q4 2016) and employing new staff from the UK workforce (8 per cent)

Business costs:

  • Compared to last quarter, cost pressures either went up or remained stable during Q1 2017. The balance figures for the cost of borrowing (+8 per cent), pressure from employees to increase wages (+19 per cent) and cost of raw materials sourced internationally (+25 per cent) all saw a 1 point change on Q4 2016
  • The balance figure for the cost of fuel) rose by 4 points to a Capital 500 record high of +48 per cent. Another record high was recorded for the cost of raw materials sourced domestically which increased by 2 points to +28 per cent

Cashflow and investment:

  • While Capital 500 businesses’ cashflow position worsened during Q1 2017, capital investment continued to rise
  • The cashflow balance dropped by 7 points to a Capital 500 record low of -9 per cent, and has now been in negative territory for four consecutive quarters. In contrast, the balance for investment in plant and equipment rose by 3 points (to +2 per cent), as a positive balance was recorded for the first time since the referendum vote in June 2016

Business confidence:

  • All business confidence indicators went up during Q1 2017. The balance figure for overall company prospects rose by 5 points, and came out of negative territory for the first time since Q2 2016 (when a balance of +13 per cent was reported)
  • The balance figures also increased for turnover expectations (up 7 points) and profitability expectations (up 6 points) to +15 per cent and +8 per cent respectively

Economic outlook:

  • Expectations of both London and the UK economy continued to improve during Q1 2017, but remain negative overall
  • Micro businesses, on balance, reported more negative a perception of the prospects of both London (-3 per cent) and the UK (-9 per cent); in contrast, larger businesses recorded positive expectations for both (+1 per cent for the UK, +6 per cent for London)
  • Inner London businesses continued to be more pessimistic about both London (-6 per cent) and the UK (-10 per cent), than businesses based in Outer London (+2 per cent and -5 per cent respectively)

 

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