The London Small Business Index (LSBI), which measures confidence amongst businesses, has strongly risen since the last quarter. It currently stands at 38%; in Q2 2021, the reading was -1%.
Business sentiment in London (38%) heavily outperforms the national average (16%) and in terms of confidence scores, London has reported the highest of the UK regions. Investment intentions going into the next quarter are relatively high and stronger than the UK average.
Reported revenue shows signs of a continued recovery since Q3 2020, following a sharp decline during the pandemic. However, this continues to be net negative (-6%) – so caution and sound political decisions are critical. Central London support is essential in the run up to Christmas and FSB London are calling for fresh Congestion Charge changes – whereby evenings will go free again (as the Mayor has championed in his recent Consultation) – with a reintroduction day of 1st December in the run up to Christmas to support the Night Time Economy and its supply chain.
The number of small businesses in London hiring last quarter (12%) continues to trail the number decreasing staff numbers (14%) – whilst the picture looks a lot healthier for the next quarter with 22% looking to increase headcount.
It is important to remember that Treasury plans to increase Class IV and Employer NICs as well as dividend taxation by 1.25 percentage points in the Spring will add to inflationary pressure, could cause firms to put the brakes on hiring and discourage investment as we move further into 2022. A third of London employers (28%) say that they would be forced to increase prices due to the changes. They will also cut their own compensation (18%), recruit less (14%) and scale back investment (8%).
Among company directors – who were excluded from the Government’s income support programmes during lockdowns – 36% say the tax changes would inhibit their ability to save for the future, further reducing the already small share that save into a pension, whilst also causing them to increase their debt levels (5%).
In London, the general economic conditions in the UK (58%), appropriately skilled staff (38%) and consumer demand (25%) are the greatest perceived barriers to growth over the coming twelve months.
FSB London Policy Chair, Rowena Howie, said: “London small businesses are showing signs of positivity which we hope can be sustained through the winter period. We remain optimistic but there are headwinds that concern us. Businesses that we speak to are feeling the pinch with inflationary pressures creeping in, extra fears that mortgage rates are going to go up as a direct result of the price increases; and employment costs ratcheting up in the Spring which could dampen the potential job increases in the run up to Christmas. The level of booster jabs given to Londoners must continue to be high in November and December to ensure that London stays open for business, with high levels of employment and a strong consumer-led period of growth for the rest of 2021.
“The Mayor has closed the consultation period for the Congestion Charge changes, and one pro-business step he could make is to bring forward his preferred changes to December 1st – whereby the Charge will be scrapped again past 18:30 every night of the week to give the Night-time visitor economy an even bigger boost as we still await international tourists to return.”