Easing inflation has failed to improve business confidence in London, with just a quarter of firms anticipating the capital’s economy to improve over the next year.
According to the London Chamber of Commerce and Industry (LCCI), 38 per cent of firms expect London’s economy to deteriorate over the next year with inflation still the dominant concern.
The dip largely reflects falling confidence among larger businesses. Just 22 per cent of larger firms thought London’s economy will grow in the next year, down from 37 per cent in the previous quarter.
Despite inflation falling in August, two thirds of firms said they were more concerned about inflation in the three months to September than they had been in the previous quarter.
64 per cent of firms said energy costs had increased in the last quarter, which was marginally lower than the 69 per cent in the quarter before.
James Watkins, head of policy and public impact at LCCI said “whilst there are signs of improvement in the capital’s economy, cost pressures remain high for businesses.”
He argued that businesses were struggling with a lack of certainty, citing high energy bills, uncertainty over infrastructure investment and the capital’s “skills crisis”.
The bleak sentiment comes even as inflation fell faster than expected in August, dropping to 6.7 per cent. In response the Bank of England decided to keep interest rates on hold in their most recent meeting, ending a run of 14 consecutive rate hikes.
However, concerns have been raised over recent weeks that a resurgence in oil prices might lead to a resurgence in inflation as energy costs rise. Even if inflation does not pick up again, markets are also slowly readjusting to a world where interest rates remain higher for longer.