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Confidence worsens in the capital as UK sees recovery

The latest Business Confidence Monitor (BCM) for London, produced by ICAEW, reveals growing pessimism in the city even though nationally the figures are improving.


March 2018

The news for London is not encouraging – while the UK as a whole recorded a business confidence index of -1 in the first quarter of 2018, London’s figure stood at -12, making it the lowest confidence reading among all the regions. This has been put down, in part, to the uncertainty surrounding Brexit, which can affect key sectors such as property and finance.

At the same time, regulation is proving to be an increasing concern for business in London especially those in the banking, finance and insurance sectors.

However, there are still encouraging signs: sales in the capital have continued to recover, while profits are projected to grow.

Harpreet Panesar, ICAEW London Director said: “The capital continues to face difficulties with growing uncertainty around the impact Brexit will have on key sectors such as Property and Banking, Finance and Insurance. However, London businesses need to look for the light and remember the importance of supporting the future by investing in technology, training and development, as well as new products and services to help drive economic growth.

“Amid the continued lack of confidence in the capital, there are glimpses of optimism. London investments are expected to continue to rise throughout 2018 as domestic sales are still on the rise following a disappointing slowdown in 2017."

The full details of the BCM for London:

  • Business confidence in London is the lowest across all UK regions at -12.0. A likely reason for low confidence is the uncertainty surrounding the impact of Brexit, especially on key sectors for London such as Property and Banking, Finance and Insurance.  
  • London also has the highest proportion of companies (54%) citing regulatory requirements as a growing challenge. Nationally, concern over regulation is most acutely felt in the Banking, Finance and Insurance sector which is very prominent in London. Some of this may be Brexit related. 
  • In contrast, the lack of confidence across London companies does not appear to be because of the latest sales trends. Domestic sales have continued to recover from the slowdown in Q2-Q3 2017, with growth of 3.6% in the current quarter. In addition, export growth of 4.2% is above the UK average of 3.7%. 
  • Furthermore, the encouraging performance of exports and domestic sales is consistent with a fall in the proportion of companies operating below capacity. At 38% London continues to have the lowest percentage increase across all regions in the UK. 
  • An expected slowdown in input price inflation (from 2.4% to 1.9%) in the upcoming year is consistent with faster projected growth in profits. These are expected to rise by 5.0% in the upcoming year, following growth of 2.9% in the last 12 months.
  • Investment growth, however, is low, doubtless reflecting the weak confidence among London companies. Capital investment is expected to rise by 2.4% in the next year, down from 2.7% over the last 12 months. Research and development budgets are also expected to slow to 2.2% growth from 3.6% in the year to Q1 2018. 

Find out full details of the ICAEW Business Confidence Monitor 

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