Only one in ten businesses think London’s status as a world city will grow over the next five years, while a third fear the capital’s standing will shrink, a CBI / KPMG survey reveals today (Thursday).
The poll of senior executives shows that the credit crunch, poor transport infrastructure, worries about crime, and a shortage of skilled workers are all threatening London’s competitiveness.
The share of bosses who described London as a good place to do business fell from 95% a year ago to 77% in this survey. And 32% now see London’s significance as a global city slipping over the next five years, compared with just 13% two years ago.
The biannual survey also showed that the credit crunch has caused business volumes and values to dip, while confidence about the future is at a survey record low. Over a third (37%) said the availability of capital had worsened since the start of the squeeze. 81% expect their sales and revenue growth to suffer in the months ahead and, in this difficult climate, firms are cutting back on plans to recruit and spend on IT, infrastructure and research.
London is also facing a skills crunch, as the vast majority (79%) of firms struggle to find people with specific technical skills. Worries about key employability and managerial skills have also deepened over the past year, with the proportion of firms citing them as problem areas rising to 48% and 41% respectively. While half (51%) of firms rely on staff from overseas, it remains imperative to improve the skills base of Londoners.
New survey questions on crime reveal that 59% of respondents think heightened concerns about knife crime are having a negative impact on London’s reputation as a place to work, live and visit. This negative perception could adversely impact recruitment and retention, and investment. Almost half (47%) of respondents say crime is a direct problem for their business, with a third saying that incidents disrupt business, and 20% saying they are costly.
The quality and reliability of the capital's transport infrastructure remains a big problem, particularly the road network, which two thirds of firms (61%) said is getting worse, compared with 53% who thought so a year ago. 78% said the reliability of London's roads is less than satisfactory, or poor. Opinion was divided on the Tube, but businesses were generally satisfied with London's taxis, buses and the DLR.
Sufficient capacity at Heathrow is seen as vital for London’s international competitiveness and three quarters (73%) said building a third runway is important, provided the environmental conditions are met.
Almost three quarters (72%) said the cost of complying with regulation and red tape had gone up in the six months to late September.This is an increase from 62% a year ago, and an unwelcome burden during testing economic times.
On a more positive note, firms are optimistic about the 2012 Olympic Games, and 70% expect indirect business opportunities to emerge from the event, while 58% foresee for direct business involvement.
More London businesses are incorporating climate change policies into day-to-day business compared with six months ago. 62 per cent of firms say they have measured their carbon footprint with half of those surveyed saying they have had some success in reducing their emissions. And more than a third of companies (38%) are reporting their annual emissions, compared to 24 per cent six months ago.
Richard Reid, London Chairman of KPMG said:
"The capital has felt the full force of the credit crunch and is facing tough challenges on many fronts; not just from the economic conditions but from new emerging financial centres, and the internal pressures of the City itself.
"These findings should clearly send a message to the policy makers. Whilst it is important that a tougher regulatory framework be looked at to address the issues that have left the City badly burned by the credit crunch, it is essential that they don't hamper London's ability to compete with other global centres by rushing in a raft of new rules which ties businesses in knots for years to come.
"The government's decision to borrow to invest in major capital projects to limit the downturn in the economy will undoubtedly have consequences on the public purse, though this should be good news for much-needed capital projects in London to improve infrastructure and transport.The capital needs investment in projects like Crossrail to ensure long term competitiveness.
"A strong commitment to improving the skills of Londoners, delivering the infrastructure planned and building a safe and secure environment, are crucial to help London maintain its status as a world city. It is important that politicians, police and organisations like Safer London Foundation listen to the very real concerns of business and ensure that all sides work together to tackle the issues they can influence and mitigate those they can't."
Nigel Bourne, Director of CBI London, said:
"London is a city besieged by a struggling economy and an ailing financial sector, but its competitiveness is also being let down by shortcomings in its transport infrastructure and talent pool. Businesses are worried about the capital’s ongoing attractiveness on the global stage against old rivals like New York and Tokyo, as well as new players like Dubai and New Delhi.
"It is critical to keep a longer term perspective and to invest in London’s infrastructure, the skills of its workforce, and in building a safe environment where crime is minimised. Only then will London be in a good position to strengthen its competitive edge when the economic upturn comes.
"It is encouraging that so many firms are looking forward to the 2012 Games, and see it as an opportunity for good business and a chance to polish the capital’s image. And it is also pleasing that awareness about climate change and energy use carries increasing weight with businesses in the capital."
1. The London Business Survey is conducted twice a year to monitor the views of business on London as a place to do business. 106 businesses took part, representing almost half a million employees in the UK. One third (35%) of respondents were SMEs.
2. Respondents included major companies and chief executives often filled in the questionnaire. The dominant sectors were professional services (37% of respondents), energy/manufacturing/construction (22%), banking/finance/insurance (13%), transport (9%), information/communication/technology (7%), and hospitality/leisure/retail (7%).
3. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses which together employ around a third of the private sector workforce. Member companies, which decide all policy positions, include:
- 80 of the FTSE 100
- some 200,000 small and medium-size firms
- more than 20,000 manufacturers
- over 150 sectoral associations
The CBI is also the UK's official business representative in the European Union. It has offices across the UK and in Brussels, Washington, New Delhi and Beijing to coordinate British business representation around the world.
4. KPMG is the global network of professional services firms who provide audit, tax and advisory services. KPMG LLP operates from 22 offices across the UK with nearly 11,000 partners and staff. KPMG in the UK recorded a turnover of £1.6 billion in the year ended September 2007. KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.
Paul Platt CBI press office, 020 7395 8090, out-of-hours pager 07623 977 854.
Emma Murray, KPMG Press Office, 020 7694 6506, mobile 07956 629 361, emma.murray@kpmg.co.uk