London firms nervous about expansion but plan to hire

Jo Faragher

Most London businesses want to expand during the next year, but are reluctant to do so in the capital, according to a survey by the CBI and KPMG, which also revealed London offered some of the best access to skills and talent.

The report, published around the anniversary of the Olympic Games, found that high operating costs and housing shortages were putting off companies expanding in the capital.

Almost two-thirds of London-based companies plan to grow during the next year (62% compared with 53% in December), but only 29% of these plan to expand in London, while the number of firms seeking to expand overseas has grown to 45% from 27% last December.

Access to skills and talent was cited as London’s top strength as a business environment, however. The number of businesses in London freezing recruitment dropped to 17%, its lowest level in two years, down from 31% in December and 51% a year ago. That said, more than two-thirds (68%) are still only hiring where essential.

London companies plan to spend relatively more on recruitment and training; product and process innovation; and IT plant and machinery, but less on land and buildings.

Sara Parker, CBI Director London, said: “It’s encouraging that more London firms plan to expand but worrying that fewer expect to do so in the capital. Some of the perennial challenges of doing business in the capital, like high operating costs, housing shortages and transport challenges, threaten to undermine investment confidence.”

She added: “This is a wake-up call – we need to make sure that London does not lose ground to global rivals.”