London businesses are poised to lead the UK economy out of its slowdown, although they remain acutely concerned about the impact of higher interest rates and scorching inflation, a new survey out today shows.
Confidence among the capital’s firms slimmed four points to 43 per cent, although that was the highest reading of any area in the UK, according to Lloyds Bank’s business barometer.
It is the second month in a row that London has topped the business confidence table.
Companies are focusing on channelling cash into their existing workforce in a bid to scale up productivity and likely avoid having to pay high starting salaries to attract new workers amid a tight labour market.
Just over a third of London firms told Lloyds Bank that investing in their staff was their top priority, closely followed by implementing new technology such as AI tools.
The survey also suggested that London firms’ optimism has received a boost ahead of the typically busy summer season.
Becci Wicks, regional director for London at Lloyds Bank Commercial Banking, said: “Although the business barometer registered a slight dip in confidence, the results are overwhelmingly positive as the country’s capital gears up for the busy summer months.
“This is especially true for those in retail and hospitality, that will be preparing for the welcome influx of tourists.”
Across the UK, business confidence trimmed five points to 28 per cent this month.
Since the turn of the year, the UK economy has outperformed the gloomy forecasts parroted by the Bank of England and International Monetary Fund.
The pair thought the country was on course for a tough recession sparked by sky high inflation and the Bank’s series of interest rate rises to tame it. Both have now ditched that call.
Spending has smashed expectations, dragging UK economic growth out of negative territory, although it is still pretty flimsy.
Analysts have, however, revisited their UK projections again after numbers out from the Office for National Statistics last week revealed inflation is withstanding the Bank’s twelve straight rate hikes.
That has raised market expectations that Bank governor Andrew Bailey and co will send borrowing costs to 5.5 per cent.
Such a move would intensify the squeeze on households and businesses, re-raising the threat of a recession in the UK.
Companies in the north posted the second best confidence reading this month at 35 per cent.