Business confidence in the outlook for London’s economy rose further during the second quarter of the year, despite business performance indicators not increasing at the same pace.
At the end of 2020 just 20% of London businesses felt that the city’s economic prospects would improve this year, the lowest level of confidence since the 2008 financial crash. But the success of the vaccine rollout in the first half of this year, along with lockdown easing, has seen that figure increase to 48%. The number of businesses saying that London’s economic prospects will improve over the next 12 months is now at a five-year high.
London Chamber of Commerce and Industry’s quarterly ‘Capital 500’ survey shows that the proportion of business reporting an increase in cashflow during Q2 doubled when compared to Q1 (25% vs 12%). 33% of the 520 businesses surveyed reported a fall in cashflow levels during Q2 however, but an improvement on the 50% saying so in Q1.
The proportion of companies reporting an increase in domestic orders rose to 18%, from 10% in Q1. The proportion reporting a fall remains greater at 30% – but this was an improvement on the 45% saying so in Q1.
Domestic sales also saw an upturn in the proportion of businesses saying it had increased during Q2, 19%, from 15% in Q1. The proportion of businesses saying their domestic sales had fallen reduced from 42% in Q1 to 31% in Q2.
In contrast to the noticeable improvements in the domestic demand, export demand is recovering at a slower pace. There were slight improvements in the proportion of businesses saying their export sales or export orders had fallen and more saying they were the same level as the previous quarter. There was no improvement in sales or orders increasing though.
In Q1, 28% of London businesses reported a fall in their employment levels. This reduced to 15% in Q2 – with an increase in the proportion of companies saying their employment levels are the same as the previous quarter.
Only 5% of businesses now expect their workforce numbers to fall over the next year – with the proportion of businesses expecting their workforce to increase up to 14%, from 11% in Q1.
Reflecting on the findings, Richard Burge, Chief Executive of London Chamber of Commerce and Industry, said: “It’s clear that the easing of COVID restrictions and the hope brought about by the NHS vaccination roll-out has given a boost to business confidence that outpaces London’s economic performance.
“We are seeing optimism in the worst of this pandemic being behind us. But the data shows economically we have a long road ahead of us.
“Government must ensure that our border and Test and Trace systems can keep our economy safely open domestically, whilst helping to recover tourism, business travel and international trade. We will then begin to see an economic indicator boom in keeping with the optimism that our resilient businesses have in the capital’s prospects.”