- A significantly larger proportion of London businesses expect a further decrease in profits for the coming quarter (35%) versus the outlook expressed in Q1 (19%)
- London small businesses decreasing headcount outpaces those increasing headcount in Q2
- Investment intentions for London businesses have risen significantly, with a net positive outlook (21%)
The FSB London Small Business Confidence Index has dipped back into negative territory in the last quarter – reflected by the falls in net revenues for small firms because of the cost of doing business squeeze.
Amid the rate rises and sticky inflation of the second quarter, and with economic growth underwhelming at best, it’s disappointing but perhaps not surprising that the momentum from the first three months of the year petered out somewhat – but small firms are survivors, and there are positive signs in our findings.
In terms of investment intentions, London is outperforming every part of the UK. Investment intentions for London businesses have risen significantly, with a net positive outlook (21%) compared to 7% nationally. This positive outlook shows the determination and stoicism within small businesses and every opportunity must be provided at local, Mayoral and national level to create a business environment conducive to growth.
74% of small businesses increased salaries over the previous 12 months. This is higher than the 64% reporting increased salaries in Q1 2023. Wage predictions are more positive in Q2 2023 versus Q1 2023. In Q1, wage predictions saw London small businesses anticipating a net 53% change in wages. In Q2, this now stands at a net 57% change.
Concerningly, the outlook for future revenue is now negative in London, with a net score of -2%. This is a fall from Q1 2023 where the net outlook for future revenue stood at 19%. This is also on par with the nationwide average in Q2 2023, where there is a net score of -3%. A significantly larger proportion of London businesses expect a further decrease in profits for the coming quarter (35%) versus the outlook expressed in Q1 (19%).
In London, the general economic conditions (53%), consumer demand (38%), and appropriately skilled staff (25%) are the greatest perceived barriers to growth over the next 12 months.
Laura Timm, FSB London Policy Chair, said:
“Given the right conditions for growth, small firms in London have the potential to power a groundswell of economic activity. With the domestic economy the biggest perceived barrier to growth, however, they are in something of a catch-22 situation.
“Tackling late payment in the official response to the recent late payment consultation would forge a path to an environment where late payments are all but eliminated. We want to make London a ‘Prompt Payment Capital’ where all Anchor Institutions lead by example and encourage big businesses to pay their supply chains on time.
“Taking concrete action on late payment would help to unlock confidence in the third quarter, especially with the end of the rises in the base rate perhaps finally in view.
“Furthermore, the Ultra Low Emission Zone (ULEZ) is an issue of great concern to many FSB members. We must give small businesses ‘time to comply’ with the Extension. We feel that implementing a no charge ‘sunset clause’ period up to September 2024 to be a sensible measure, and greater awareness for small firms of scrappage and retrofitting options.”