As the UK’s future relationship with the European Union hangs over the capital’s businesses, firms view the tech and creative sectors as fundamental to London’s future prosperity, according to the latest CBI/CBRE London Business Survey. Two thirds of the 271 respondents to the survey (65%) said that the tech and creative sectors were the principal sectors for the capital’s economic growth over the next five years, followed by professional services (49%) and FinTech (47%).
With the vast majority of firms – more than nine in ten (91%) – continuing to rate London as a good or great place to do business, bolstering the resilience of the city’s infrastructure is also key to securing the capital’s future growth. Nearly three quarters of firms want the Government to push ahead with Crossrail 2 (69%) whilst over half of businesses (59%) want Heathrow’s third runway to be a priority project.
With the overwhelming majority of London businesses employing staff from the EU (88%), Brexit is having a significant impact on the capital’s companies. Just under three quarters of firms (73%) view uncertainty over the UK’s role in Europe as their top concern, whilst a similar number (69%) have developed, or are developing, a contingency plan for when the UK leaves the EU.
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Indeed, over a quarter of respondents (27%) indicated they are planning to move part of their operations overseas. Close to two thirds (62%) have, or are developing, a strategy to address skill shortages that could be incurred if restrictions are placed on EU nationals working in the UK.
Coupled with concerns about Brexit, only one in ten companies (10%) feel more optimistic about the economy over the next six months (compared to 19% in the last Survey), whilst only 16% feel more optimistic about their own business prospects over the next half year (compared to 26% in the last Survey).
“Despite the political uncertainty in the air, London continues to enjoy sound economic health and strong business fundamentals,” says Eddie Curzon, director, CBI London. “If the city can also push ahead with quality infrastructure projects – from HS2 and Crossrail 2 to Heathrow’s new runway – we will see London cement, and further, its reputation as one of the best places in the globe to live, work and grow a business.”
CHART – Following a turbulent first half of 2017, business optimism declined with only 10% of firms feeling more optimistic about the economy over the next six monthsSource: CBI/CBRE London Business Survey
Across the UK, the CBI speaks on behalf of 190,000 businesses of all sizes and sectors and its corporate members together employ nearly seven million people, about one third of private sector employees. This latest survey was carried out between 03-Jul-2017 and 04-Aug-2017 with 271 responses, mainly directly from CEOs of leading companies.
Even though the on-going Brexit negotiations continue to provide a significant degree of uncertainty and are weighing heavily on minds on businesses in the capital, the encouraging responses highlight that the UK capital remains at the forefront of business strategies.
Despite the political uncertainty, the fundamentals of London’s business environment remain healthy. A majority of firms (60%) plan to expand their organisation in the next year, and over a third (39%) intend to increase their head count (compared to 23% who intend to make redundancies). Over half of firms (57%) plan to maintain their current investment plans, and nearly one in five (17%) intend to increase them.
CHART – ‘Uncertainty over the UK’s role in Europe’ continues to be the top concern for firms as they continue to operate under the context of the on-going Brexit negotiationsSource: CBI/CBRE London Business Survey
Businesses in the capital are also optimistic about skills. Close to two thirds (62%) are confident that there will be sufficiently skilled people across all levels to meet their needs over the next five years, with 58% of firms believing there will be enough people to fill low-skilled jobs. Businesses view digital knowledge as the skill most lacking among their current workforce (32%), followed by engineering and construction (22%) and financial skills (14%).
If you are measuring business confidence by passenger mobility then 2017 is proving to be a strong year for London with The Blue Swan Daily analysis showing all of the capital’s airports reporting increases in traffic during the year to date.