What a year: London small business confidence has jumped in the past 12 months

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Small London businesses have seen confidence bounce back in the past year (Source: Getty)

Confidence among London’s small businesses has increased dramatically over the past year according to an index tracking thousands of firms, outstripping the average across the rest of the country.

The capital’s businesses report an improvement to a positive reading of 25 for the index, compiled by the Federation of Small Businesses (FSB), based on judgements of prospects for the next quarter.

A year ago the index showed confidence among the capital’s businesses had fallen to a negative reading of 10, well below every other region in the UK, but since the measure has since bounced back to record two consecutive quarters of optimism.

Read more: London business confidence rebounds after a year in the doldrums

Only small businesses in Wales and the East Midlands now report a higher level of confidence than London, according to the survey.

During the second quarter of 2016 businesses in the capital faced the prospect of weak economic growth and divisive campaigns from both sides of the EU referendum campaign.

In the year since then the UK economy has performed stronger than expected, despite building fears of a slowdown in consumer spending weighing on future growth.

Some caution remains, with prospects for capital investment declining. A fifth of small London businesses expect to decrease investment, with only 36 per cent planning an increase, a decline since the last quarter.

Read more: IoD: Business confidence dives as political uncertainty rises

Part of that decrease may reflect a retrenchment as higher costs, including dramatically higher business rates for some, force firms to rein back spending to retain profit margins. Costs are increasing for more than two-thirds of firms.

Sue Terpilowski, the FSB’s London policy chair, said: “Consumer-facing businesses are really starting to feel the squeeze. Many small firms that operate in the retail and hospitality sectors depend on EU 27 workers. Ensuring these vital employees have the right to remain needs to be a first port of call once Brexit talks launch.”

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