The technology and creative industries will drive London’s growth in the next five years, closely followed by professional and financial services, according to the latest CBI/KPMG London Business Survey.
Nearly two thirds of businesses said these sectors (69% technology and creative industries; 65% professional services; 62% financial services) are key to London’s economic growth over the next half decade. More than half of the 128 firms surveyed (58%) believe that east London (Canary Wharf, the Royal Docks and Stratford) will be vital to the city’s future economic growth, with 44% also rating the City, Shoreditch and Old Street as key engines of growth.
Optimism about the economy remains high at 65%, easing back slightly from last quarter’s record high of 70%. Half of the respondents are optimistic about prospects for their own firms over the next six months, while 79% rate London as a good, or very good, place to do business.
However, employers ranked retaining key staff, and a lack of appropriately skilled job seekers, as the biggest concerns over the next year. The majority of firms (52%) are increasing headcount and only 15% are continuing with a recruitment freeze, down 3% on the previous quarter.
The cost of doing business in the capital also remains a concern. Housing costs were again highlighted as one of the biggest threats to competitiveness. Ahead of next year’s General Election, businesses are closely monitoring issues around infrastructure investment (22%) and the tax environment (22%).
Lucy Haynes, CBI London director, said: “As the recovery gathers steam, it’s encouraging that London firms continue to be upbeat about the future and are looking to expand.
“The technology and creative industries have shot up the ladder as some of the fastest-growing sectors in London, with the majority of businesses seeing them as holding the key to the capital’s future growth.
“However, if we are to attract and retain the brightest and best minds to Tech City and to the rest of London, we urgently need to tackle the endemic housing problem the capital faces. Freeing up land and building more homes is critical to dealing with this. Businesses’ concerns, regarding skills, the level of infrastructure investment and the corporate tax rate, also need to be addressed to keep the capital competitive internationally.”
Richard Reid, London chairman of KPMG and the East London Business Alliance (ELBA) said: “The technology and creative sectors in the Capital are in rude health, and play a key role in the burgeoning recovery. There are some fantastic advocates in government and business for our buzzing start-up scene but we need focused policies that help develop and encourage education in STEM (Science, Technology, Engineering and Maths) subjects, and ease access to tech talent on a global basis.
“The success of our technology sector, like all other sectors in the Capital, relies on the ability for businesses to have access to a skilled talent pool of staff. Earlier careers advice in schools, more focus on vocational training and schools working more closely with employers could all support economic recovery and growth in the longer term.
“Just as the investment made in East London as part of the 2012 Games is now paying dividends in attracting businesses large and small to this diverse part of the Capital, investment in providing greater training for our young people now is vital for their future and the future health of the economy.”
The survey also shows a majority of firms are currently focusing on doing business in the UK (83%), and in Europe (63%), with nearly two thirds (65%) planning to expand their business operations over the next year, up from 64% last quarter. Much of this expansion is set to be domestic in focus, with 35% looking to expand in London, and 32% in London and the UK, but almost one fifth of respondents are looking to expand internationally (19%).