The shortage of affordable homes to buy and rent in the capital is crippling firms’ ability to recruit and retain staff, according to the latest CBI/CBRE London Business Survey.
Two thirds (66%) of the 176 respondents to the London Business Survey said that housing costs and availability are having a negative impact on the recruitment of entry-level staff. Compared with 57% when this question was last asked in September 2015, this latest figure is a survey record high. The housing shortage is also an issue for more senior employees, with three fifths (59%) of the capital’s firms citing it as an issue for recruiting mid-level managerial staff (compared with 45% in 2015), and almost a quarter (22%) saying the same for senior level staff.
Indeed, the gravity of the situation means that nearly half of firms (44%) are offering premium salaries to recruit, and hang on to, staff. It is also having a knock-on effect on businesses’ ability to offer flexible working, with over a third (36%) finding it hard to do so. Over a quarter (28%) of respondents said employees are actually leaving their jobs because they cannot afford to live in the local area, whilst nearly two thirds (62%) don’t believe the housing market will become more affordable in the next three years.
Meanwhile, business optimism in London is slowly recovering. Nearly a quarter of firms (22%) feel more optimistic about the economy over the next six months – the highest figure since September 2015 (47%) – and 25% feel more optimistic about their own business prospects over the next half year. 30% of companies plan to increase their investment plans, and 46% plan to increase headcount.
Eddie Curzon, CBI London Director, said:
“This survey speaks loud and clear – London’s housing shortage is a ticking time bomb. The potent combination of lack of supply and high prices means businesses themselves are being priced out of the market, as they can’t afford to recruit and retain their workers, from entry-level to senior staff. And with two thirds of firms not optimistic the housing market will become more affordable in the next three years, we have a stark challenge on our hands. We’re squarely behind the Mayor’s aim to build 66,000 new homes a year, but want to see more clarity on how he will work with local authorities to crucially unlock supply in every borough.
“More positively, London’s firms are slowly beginning to look to life beyond Brexit, with optimism in the capital about the economy rising to a level – albeit low – not seen since before the Referendum.
“To make the most of this, and to ensure London remains a globally attractive place to do business, it is more important than ever that the city’s infrastructure is equally world-beating. From moving quickly ahead with Crossrail 2, to building more cycle routes, there are real opportunities to do so, so we urge City Hall to press ahead with them.”
Adam J. Hetherington, CBRE Managing Director, London, said:
“Against a politically noisy backdrop, businesses are taking stock and feeling more optimistic about the year ahead. It is reassuring to see that 61% of businesses are planning to expand over the next 12 months.
“Continued growth is vital for London, which remains one of the most sought-after cities for investment. The Government must take heed of the key issues such as housing, business rates and infrastructure which are impeding businesses ability for future growth.”
Uncertainty over the UK’s future relationship with Europe remains the top issue of concern (66% of respondents) for the sixth consecutive survey. More than a quarter (27%) of firms are planning to move part of their operations abroad, with one in twenty (5%) planning to move their entire operation overseas. Retaining access to the Customs Union and the Single Market is firms’ top priority (63%) in Brexit negotiations, followed by guaranteeing European citizens’ right to remain (53%), who are crucial to the capital’s workforce.
On infrastructure, the top priorities for London’s firms are getting on with Crossrail 2 (64%), the third runway at Heathrow (52%) and building more cycle routes (36%), which has moved up the priority list to third place. To help boost infrastructure investment, over three quarters of businesses (78%) want a more streamlined planning system and over half (51%) support devolution of funding to City Hall.
Notes to Editors:
The survey was carried out between 09 January and 05 February 2018. There were 176 responses, mainly directly from CEOs of leading companies.
Professional services was the largest sector, covering 26% of the total sample, followed by banking, finance & insurance (19%), information, communications and technology (16%), other sectors (15%), energy, manufacturing and construction (9%), hospitality, leisure and retail (8%), transport and distribution (4%) and property (3%).