Brexit having a significant impact on London firms, but tech and media sectors growing

With the overwhelming majority of London businesses employing staff from the EU (88 percent), Brexit is having a significant impact on the capital’s companies, according to the latest CBI/CBRE London Business Survey. Just under three quarters of firms (73 percent) view uncertainty over the UK’s role in Europe as their top concern, whilst a similar number (69 percent) have developed, or are developing, a contingency plan for when the UK leaves the EU. Indeed, over a quarter of respondents (27 percent) indicated they are planning to move part of their operations overseas. Close to two thirds (62 percent) 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. However, two thirds of the 271 respondents to the Survey (65 percent) 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 percent) and FinTech (47 percent).

For the vast majority of firms – more than nine in ten (91 percent) – 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 percent) whilst over half of businesses (59 percent) want Heathrow’s third runway to be a priority project.

Coupled with concerns about Brexit, only one in ten companies (10 percent) feel more optimistic about the economy over the next six months (compared to 19 percent in the last Survey), whilst only 16 percent feel more optimistic about their own business prospects over the next half year (compared to 26 percent in the last Survey).

Eddie Curzon, CBI London Director, said: “Despite the political uncertainty in the air, London continues to enjoy sound economic health and strong business fundamentals. Nine in ten firms say our city is a great place to do business, whilst investment, expansion and hiring plans are all running high.

“The capital’s booming, world class tech and creative firms hold the key to unlocking the growth that will ensure the city remains a global business powerhouse for years to come. 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.

“It’s clear Brexit is weighing heavily on minds in the capital though, so it’s absolutely vital that substantive progress is achieved during the Brexit negotiations and that comprehensive, time-limited transitional arrangements are agreed with all urgency. Our businesses need to make decisions now about investment and employment that will affect economic growth and jobs in the future. London – and the country as a whole, which benefits from a flourishing capital – needs the best business environment in which to grow, create jobs and boost prosperity.”

Adam J. Hetherington, CBRE Managing Director, London, said: “Even though the on-going Brexit negotiations continue to provide a significant degree of uncertainty, it is encouraging to see that 57 percent of businesses plan to maintain their current investment plans, representing an increase from the previous survey. Additionally, 60 percent reported planning to expand their organisation over the next 12 months, with the majority planning to do so both in London and the UK.

“It is therefore clear that the capital remains at the forefront of business strategies and the resilience of the London market, coupled with its strong fundamentals, is widely recognised.

“Central to this is London’s position as a hub for the dynamic tech and creative sectors. With the Brexit negotiations creating uncertainty in the occupier markets, it is not surprising that 65 percent of respondents cited them as principal sectors for the capital’s economic growth over the next five years. However, the extensive improvement of London’s infrastructure, as well as the unrivalled cultural and social benefits the capital provides, will be vital in continuing to attract new talent and ensuring that London continues to compete on a global stage.”

Despite the political uncertainty, the fundamentals of London’s business environment remain healthy. A majority of firms (60 percent) plan to expand their organisation in the next year, and over a third (39 percent) intend to increase their head count (compared to 23 percent who intend to make redundancies). Over half of firms (57 percent) plan to maintain their current investment plans, and nearly one in five (17 percent) intend to increase them.

Businesses in the capital are also optimistic about skills. Close to two thirds (62 percent) are confident that there will be sufficiently skilled people across all levels to meet their needs over the next five years, with 58 percent 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 percent), followed by engineering and construction (22 percent) and financial skills (14 percent).