London’s economy performed better than expected during the third quarter but a squeezed labour market troubled businesses trying to recruit staff, new figures show.
Sales and orders reached their highest levels for at least a year during the period, according to a survey by the London Chamber of Commerce and Industry (LCCI).
Businesses in the capital increased investment in both training and plant and equipment (by 17 per cent and 15 per cent respectively), while 24 per cent of firms reported increased cash flow. The figures represent the biggest rise in these indicators since the start of 2016.
“For the second consecutive quarter the London economy has returned results that are better than some would expect, given the ongoing political turmoil and uncertainty of Brexit, said Sean McKee, LCCI’s director of policy and public affairs.
McKee said the capital’s performance “is testament to the resilience of London’s firms”, but said some of the increased investment could be part of firms’ “Brexit preparation spending, rather than the underlying strength of the economy”.
London’s tightening labour market, which is heading for record employment levels, may also be partially responsible for the increased spend on training.
Most businesses (83 per cent) did not try to hire new staff during the third quarter, but over half (56 per cent) of those that did encountered difficulties recruiting.
Almost a third (31 per cent) of firms reported coming under increased pressure from their employees to raise wages in the last three months, an increase of eight per cent on the previous quarter.
“A restricted labour market… continues to pose challenges to the capital’s firms,” said McKee.
“The capital’s continued recruitment challenge will leave businesses ever more mindful that the wrong post-Brexit immigration system would make the situation even worse,” he added.