London’s businesses are starting to feel more optimistic after a year of gloom, with a survey of firms in the capital showing overall business confidence bounced back into positive territory in the second quarter.
The business confidence monitor from the Institute of Chartered Accountants (ICAEW) showed firms’ perceptions of their prospects over the next year turned positive for the first time since early 2016 in the second quarter of 2017.
The index measure reached 5.3 points in the second quarter, after a run of four negative quarters.
Stronger than expected growth and a more supportive global economy have helped sustain demand, helping the UK economy to perform better than expected in the aftermath of the EU referendum.
London’s exporters are also expecting a boost as their products and services become more attractive to foreign buyers in devalued sterling.
London’s firms reported total export sales volumes grew at an annual rate of three per cent in the year to the end of the second quarter of 2017. However, firms expect export volumes to a pick up further to 3.7 per cent in for 2017 as a whole, the ICAEW survey showed.
Meanwhile domestic sales volumes are also expected to accelerate in the year, with firms predicting an average 4.2 per cent expansion in sales within the UK over 2017, a big acceleration from annual domestic sales growth of 2.5 per cent in the year up to the second quarter.
The rebound to positive territory comes after a year in which global economic conditions and the Brexit vote dented the optimism of the capital’s businesses.
At the start of 2016 weakness in the global economy weighed on business confidence, sending the index into negative territory for the first time since 2012.
That was followed by the Brexit vote, which pushed the overall index to a negative reading of 17.4 in the final quarter of last year.
Andrea Dunhill, London director at ICAEW, said: “It’s encouraging to see that business confidence in London is positive for the first time in over a year.
“Profit growth is expected to rise, but is likely to be due to a pick-up in sales volumes rather than price rises, which is certainly good news for consumers in the capital. Export sales are also expected to improve as businesses in London begin to take advantage of weaker sterling.”
Looking beyond the capital, business confidence for the whole of the UK is now positive for the first time since the EU referendum.
The report highlights that business confidence across the UK increased by 15 points compared to the previous quarter, reaching a positive reading of 6.7 points.
UK GDP expanded by 0.2 per cent in the first quarter, but ICAEW’s confidence index suggests growth will rebound to 0.5 per cent in the second quarter.