Businesses concerned about Olympicsí long-term legacy and transport
More London firms are hiring as normal and fewer are resorting to redundancies compared with six months ago, as companies are cautiously optimistic about business prospects.
The latest CBI / KPMG London Business Survey of 188 companies, half of which are SMEs, shows that 57% are now hiring as normal, compared with 45% six months ago. Fewer firms are making redundancies: 20% compared with 29% in the December survey.
Half (51%) of London companies are optimistic about their business prospects over the next six months, rising to 57% among smaller and medium sized firms (SMEs). However, this is tempered by uncertainty about the economy: 43% are more optimistic about the prospects for the economy than they were six months ago, while 31% feel about the same, and 26% are less optimistic.
The top three concerns over the next year are the threat of a double-dip recession, the tax regime and rising prices and inflation. Fewer companies are concerned about public spending cuts affecting their businesses: 52% say that the cuts will have at least a moderate impact, down from 71% six months ago.
Expansion plans remain strong, with 65% of businesses saying that they plan to expand over the next year, roughly the same as December (68%). Of those, 43% have plans to expand in London, up from a third on December, and 36% want to expand outside the UK.
London firms are upbeat about the cityís competitiveness: 87% rate the capital as a good or very good place to do business compared with other global cities, and 78% believe Londonís position in five years will be at least the same or will have improved.
London firms say that the top three priorities for the Mayor should be improving Londonís infrastructure, followed by promoting the capital internationally and delivering support for skills and apprenticeships.
Sara Parker, CBI London Regional Director, said:
"Itís great news to see that more London firms are hiring as normal and redundancies have fallen. Many businesses are planning to expand, but this optimism is clearly tempered by uncertainty about the economy.
"London is a great place to do business. Companies view the cityís talent pool, ease of access to global markets and proximity to clients as the capitalís biggest strengths, but high operating costs and the fragile transport system are seen as major weaknesses.
"The roads network is the biggest transport concern for London firms who want one of the Mayorís top priorities to be improving the cityís infrastructure.Ē
Companies were asked about their preparedness for the Olympics:
∑ 36% of all London companies are confident they are prepared for transport and logistics issues during the Games, 40% are not (compared with 48% who were not confident in the December survey)
∑ 42% of companies are confident they are prepared for staff absence but 18% are not
∑ Half of businesses (50%) are confident about security issues but 17% are not.
Surprisingly many smaller and medium sized firms in the city donít think they need to prepare.
Companies were asked about the benefits of the Games: the overwhelming majority (94%) say they think the event will help promote London internationally, up from 88% six months ago. Almost three quarters (72%) think the Olympics will have a positive impact on regeneration.
But there are still some concerns about the skills legacy Ė only 45% of respondents say that they think skills will be enhanced by the Olympics. A third (33%) think the Games will benefit the economy outside London, compared with 62% who do not. Overall, 35% of London businesses are not confident that enough is being done to ensure a positive long-term legacy from the Olympics.
Richard Reid, London Chairman, KPMG LLP, said:
"Itís encouraging to see that investment and expansion plans are back on the agenda for an increasing number of London businesses, and particularly in the SME sector, which will play a vital role in getting the economy back on itís feet.
"However, there is still much concern around the increasing burden of regulation. Two-thirds of London firms say that red-tape has increased in the last year, particularly in the area of taxation, which could not only hamper growth, but is a key consideration for foreign businesses looking to establish a base in Europe.
"Almost all London businesses are confident that the Olympics will help promote the capital internationally which they also single out as a top priority for the Mayor. But there is some concern that not enough is been done to ensure the long-term legacy of the Games, particularly on skills. Whilst putting on an amazing Games to showcase London at its best is essential, it is the legacy that the Games will leave for businesses and Londoners beyond 2012 that is a vital part of hosting the Games next year, and it is obvious that more needs to be done to communicate this effectively.
"Not only will the Games leave a lasting benefit in new and improved infrastructure for London, but there is also the prospect of much needed additional housing, the opportunities for start-ups and small businesses in the enterprise zone, and the up-skilling of thousands of Londoners through the volunteers programme. KPMG is involved with the Personal Best programme, which supports the training of volunteers for the Olympics, enabling participants to gain nationally recognised qualifications at the end, but many companies are simply unaware of this programme.Ē
Londonís transport network is expected to come under considerable added pressure during the Olympics. At least half of companies rate the various modes of transport in London as staying the same or getting better, except the roads network. Only 5% say that this has improved, 30% say it has stayed the same and 62% say it has deteriorated.
On other modes of transport:
∑ 16% say rail is improving, 49% say it is staying the same, and 23% say it is deteriorating
∑ 20% say the state of the overall Tube service is improving, 39% say it is the same, and 33% say it is deteriorating
∑ 23% say buses are improving, 52% say they are the same, and 9% say they are deteriorating
∑ 56% say the cycle hire scheme is improving, 18% say it is the same, and only 3% say it deteriorating. However, only 14% of businesses find it is being used for work travel.
Companies are more positive about the transport connectivity from outside London; 22% say this is improving, 51% say the situation is staying the same, and 13% say it is deteriorating.
London businesses say that the top five solutions to increasing Londonís transport capacity should be:
1. Increase rail capacity and connections
2. Make existing airports more effective
3. Increase road capacity and connections
4. Expand Heathrow
5. Better use of home-working, local product sourcing and similar
Only 13% think the Mayorís proposed cable car between Greenwich and Excel will be a vital transport link, although 40% believe it will be an iconic attraction.
Ms Parker added: "The Olympics will see millions more people travelling around the capital, so transport upgrades must be delivered in time. Companies must plan early to adjust delivery times and staff commuting hours where necessary.Ē
The London Business Survey shows that more businesses are planning to maintain or increase investment compared with six months ago:
∑ On recruitment and training, 28% of companies say they will spend more over the coming half year compared with the past six months, and 46% say they will spend the same
∑ On IT infrastructure, equipment, plant & machinery, 26% say they will spend more and 47% the same
∑ On land and buildings, 13% say they would spend more and 49% the same.
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