‘Mixed picture’ for London firms as two thirds worry inflation will dampen progress
Inflation remained a major concern among London firms despite the sharp fall seen in the final quarter of last year, a new survey shows.
Two thirds of London businesses were concerned that inflation and high interest rates would dampen economic activity in the first half of 2024, according to a quarterly survey from the London Chambers of Commerce and Industry (LCCI).
Growing concern over the impact of higher interest rates and inflationary pressures came despite the fairly rapid drop in inflation seen at the end of 2023.
The headline rate hit four per cent in December, far below the Bank of England’s own projections, sparking market bets that interest rates would be cut in the first half of 2024.
But the survey showed that a majority of firms had seen increased fuel and energy costs in the final quarter of last year. They warned that they would have to pass these increases onto consumers.
This contributed to a fairly bleak view of how London’s economy will fare in 2024. Just 28 per cent of firms expect the capital’s economy to improve over the next year.
Despite concerns around inflation, firms were fairly optimistic about their own prospects. Half of London businesses expected their profitability to improve over the next year, the highest level seen since the survey began ten years ago.
“These findings present a mixed picture for our city,” Karim Fatehi, interim chief executive of the LCCI said.
“On one hand, cost pressures – including stubbornly high inflation, energy prices that continue to rise and concern about the prospects of the wider economy – indicate that many firms will be struggling to stay afloat,” Fatehi said.
“On the other hand, businesses have never been more confident about their own prospects, with 50 per cent predicting an increase in their own profitability over the next 12 months,” he continued.