Monday 03 July 2023 6:00 am | Updated: Sunday 02 July 2023 8:00 pm

Exclusive: London businesses shake off UK economic doom and gloom

The higher cost of borrowing has brought economic activity to a near stand-still. Consumption, which makes up a large part of domestic demand, has been hammered by the rapid rise in interest rates.

London businesses are shaking off all the doom and gloom swirling around the UK economy and are poised to power the country’s recovery, exclusive research shared with City A.M. has found.

The capital’s firms are standing up to rising costs and shaky consumer demand, but are still alive to inflationary threats, according to the London Chamber of Commerce and Industry’s (LCCI) latest Capital 500 survey.

Some 24 per cent of London businesses notched an increase in domestic sales in the second quarter of this year, up from 21 per cent in the three months to March.

It is a sign that the capital’s economy is in rude health despite firms being squeezed by rising energy, wage and interest bills and consumer finances taking a knock from surging prices.

The research “shows yet again the resilience and entrepreneurial drive of the London business community despite the economic headwinds,” Richard Burge, chief executive of the (LCCI), told City A.M.

Last quarter’s improved performance is lifting confidence in future income flows. Nearly two in five companies expect their profitability and turnover to grow in the next 12 months, the LCCI said.

Similarly, 24 per cent of the 510 firms surveyed by Savanta for the LCCI are optimistic about London’s economy over the coming year.

They are less buoyant about Britain’s overall prospects, with 44 per cent of London firms souring the country’s economic health.

Employment in the capital is on course to expand in the coming months as well. Just five per cent of companies plan to trim their workforce, while 22 per cent are set on bringing in new staff.

UK families are being gripped by sticky inflation and much higher interest rates. Prices have jumped 8.7 per cent over the last year to May, the same rate of change registered in April. Experts thought the rate would fall.

Persistent inflation has compelled the Bank of England to hike interest rates 13 times in a row to a near fifteen year high of five per cent. Last month, Governor Andrew Bailey and co shocked markets by sending borrowing costs up 50 basis points.

There were signs in the LCCI’s research that inflationary pressures are hanging around, but are at least cooling.

Some 43 per cent of firms intend to hike prices in the next three months, down from half in the last quarter.