London Firms’ Optimism About the Economy Soars

The latest quarterly survey of 154 London business leaders shows that 70 per cent of firms are more optimistic about the prospects for the economy in the next six months, 44 per cent higher than last year. 51 per cent of respondents are optimistic about their own business prospects, which has been consistent for the past ten months. More than half of London firms are continuing to increase their headcount, with only 18 per cent maintaining a recruitment freeze. The number of businesses hiring only where essential has fallen from 70 per cent last year to 59 per cent in this survey.

However, one of the biggest threats to competitiveness is the cost of housing in the capital. A quarter of those surveyed highlighted it as a risk to London’s ongoing competitiveness compared to other world cities and the second biggest threat to international competiveness, after the general cost of doing business.

The vast majority of London businesses surveyed feel that there is a lack of good quality affordable housing in the city, with half saying that this has increased their costs. Two-thirds of respondents list housing costs and availability as having a negative impact on recruitment of entry level staff, with half of respondents saying the same thing for mid-level managerial employees and a quarter for senior staff. Firms highlighted various other negative effects on business growth:

  • 42 per cent said that they are having to pay a premium to attract and retain staff
  • 41 per cent said they have experienced issues with people being unable to afford to live in the local area
  • 24 per cent said employees were having to move away from the local area because off housing costs and therefore having to leave their job.
  • The majority of firms said they had not considered relocating their company because of high housing costs but a worrying 16 per cent said they had.

Sara Parker, CBI Director London, said: “As growth begins to bed down London firms are feeling increasingly optimistic, taking on new employees and planning to expand over the next year.

“But the lack of affordable quality housing is becoming a real headache for London’s businesses and their employees.

“Many firms are telling us that recruiting and retaining staff is getting tough because people are being priced out of local markets and are forced to move further and further away from their workplace. This adds to the cost of their commute and ultimately to business staffing costs.

“London simply does not have enough affordable quality housing supply to meet demand, so the Mayor must focus urgently on freeing up land for residential building, accelerating the planning process and building many more homes.”