LONDON BUSINESS SURVEY

Transcription

1 LONDON BUSINESS SURVEY SEPTEMBER 2016 Sponsored by

2 London s business climate 81% feel less optimistic about the UK economy 36% feel about the same compared with six months ago about their business prospects 75% rank uncertainty over the UK s role in Europe as their top concern Business reaction following Brexit 50% will continue with their plans to hire following the referendum 47% believe the outcome of the referendum has had a negative impact on their investment plans 41% will maintain their current investment plans Skills in the capital 42% are not confident about being able to recruit sufficiently higher-level skilled individuals over the next five years 33% have cited a lack of digital skills in their workforce 49% will maintain access to skilled migrants to ensure they have the skills they require Mayor of London s priorities 54% think the Mayor should focus on delivering affordable housing in the capital to rent or buy 53% think the Mayor should focus on influencing the UK s negotiations with the EU 48% think that the Mayor should deliver Transport for London s road and rail investment plan.

3 Foreword This edition of the CBI/CBRE London Business Survey provides an immediate business reaction to the EU referendum. The survey ran from 28 June to 17 July at the time when the outcome of the Conservative leadership election was expected in early September. London firms have remained resilient in the face of Brexit - half of the firms surveyed are continuing with their recruitment plans and two fifths (41%) plan to maintain their investment plans. Despite this, four fifths of firms (81%) feel less optimistic about the UK economy over the next six months, compared with six months ago and similarly over half of firms (55%) feel less optimistic about their own business prospects. On skills, almost half of firms are not confident there will be sufficiently higherlevel skilled individuals over the next five years however, and those specialist digital and financial skills remain in demand. To ensure firms have their skills gaps covered, many will be looking to retrain existing staff, making use of technology to improve productivity and will continue to hire skilled migrants where possible. Almost all of the businesses surveyed employ EU citizens or have a workforce comprising international workers outside the EU. We must therefore ensure that we continue to attract the brightest and best talent and that the cost of living e.g. housing and transport costs going forward does not hinder our attractiveness as a place to live, work and do business on a global scale. Lucy Haynes CBI London Director Adam J Hetherington CBRE Managing Director, London

4 London s business climate The initial business reaction to Brexit, at a time before the new government was formed, led to optimism figures for future business and economic prospects reaching an all-time low. Uncertainty over the UK s role with Europe is highlighted as the biggest concern for firms followed by concerns over the retention of top talent. Business and economic prospects Over the past year, business optimism for the next six months has been on a steady decline. Four per cent of firms report feeling more optimistic for the economy compared with just under a quarter (20%) in Q1 this year and just under a half (47%) this time last year. The current optimism levels are the lowest recorded in the London Business Survey (going back to 2008). The majority of businesses (81%) surveyed felt less optimistic about the economy for the next six months, compared with six months ago. Businesses are slightly more optimistic about their own prospects. Eight per cent feel more optimistic about their business for the next six months compared with just over a quarter (29%) in Q1 this year. Over a third of firms (36%) feel the same as they did six months ago about their future business prospects, however over half (55%) of firms feel less optimistic about the next six months. See Exhibit 1.

5 Exhibit 1: The percentage of firms feeling more optimistic for business and economic prospects % Optimistic 100 Business propsects Economic propsects Oct '10 Apr '11 Sept '11 Apr '12 Oct '12 May '13 July '13 Oct '13 Apr '14 May '14 July '14 Nov '14 June '15 Dec '15 July '16 Top issues of concern When asked about their key concerns for business over the next 12 months, unsurprisingly Uncertainty over the UK s role in the EU came out overwhelmingly on top (75%), followed by Retaining our best people (49%) and then Reduced consumer demand (47%). Lack of appropriately skilled staff (44%) and Price increases and inflation (37%) were ranked in fourth and fifth place.

6 Business reaction following the UK s decision to leave the EU London firms have remained resilient in the face of a Brexit vote. Over two-fifths plan to maintain their investment plans with one in ten planning to increase their plans. Similarly a half of firms plan to continue hiring workers post referendum. While almost half (47%) of businesses highlight that the EU referendum has had a negative impact on their immediate investment plans, the survey results show resilience among firms and a mixed picture in terms of businesses hiring and investment decisions. A half of firms will continue to hire workers post the referendum. Just over two-fifths (41%) will maintain their investment plans while just over a fifth (21%) propose to reduce their plans and one sixth (16%) plan to freeze their investment plans.

7 Hiring intentions post the EU referendum 50% Will continue to hire workers post the EU referendum Investment plans post the EU referendum 41% 29% 12% Will no longer be hiring following the EU referendum 9% Plan to reduce headcount following the EU referendum 21% Hiring and investment plans post the referendum Say that they will maintain their investment plans Propose increasing their investment plans Propose reducing their investment plans

8 Skills in the capital Firms are unable to access the higher-level, specialist skills they need and almost half of firms are not confident that these gaps will be filled in the next five years. While graduates and school leavers have the right basic skills, many are still lacking the business and commercial awareness required. Going forward businesses are looking to retrain existing staff and many will continue to hire overseas workers. Types of skills lacking amongst the current work force Almost half of firms (42%) are not confident of being able to access people with the higher-level of skills required for their organisation in order to recruit and meet their needs over the next five years. However, businesses are more confident when filling roles that require low-skilled and intermediate-skilled qualifications with just over two-thirds (68%) of businesses, on both counts, feeling confident that they will be able to find people with these skills over the next five years. When drilling down to the levels of skills businesses have in their current workforce, there is further evidence of the current skills gap. Almost half of firms (46%) say they lack people with the necessary higher-level skills. A third of firms (33%) have cited a lack of digital skills in their workforce, with engineering (22%) and financial skills (21%) also in demand. Exhibit 2. More than half of firms (56%) are not faced with a lack of basic skills amongst their current workforce. However leadership and communication were mentioned by just over a fifth (28%, 23% respectively) where they would like to see an improvement.

9 Exhibit 2: Specialist skills lacking amongst businesses current workforce (%) Digital skills Creative skills Financial skills Engineering skills Other No skills lacking

10 The performance of graduates & school leavers Over two-thirds of businesses (69%) have recruited graduates or school-leavers over the last twelve months. When rating the performance of the new starters, around one-third of firms thought they were performing well on areas such as team working (65%), use of IT (65%) and problem solving and creative thinking (60%). Areas where businesses believe more must be done to improve graduates and school leavers skills include business and customer awareness (58%), better and more relevant work experience (56%) and foreign language skills (49%). Apprenticeship Levy In April 2017, all employers with a pay bill over 3 million each year will be required to contribute to a national Apprenticeship Levy. Businesses can then benefit from this investment in training apprentices. 61% of firms think the levy will be challenging for business and risks not achieving its intended outcome 44% believe the cost and bureaucratic nature of the levy will hamper business growth 29% see the levy as a much needed mechanism to get access to the right skills

11 Ensuring businesses have the right skills for the future To ensure businesses have the skills and talent they require over the next five years, over half of firms (56%) will be retraining/ developing current staff, half of businesses will be investing in technology to increase productivity and regardless of our position outside of the EU, just under a half (49%) still hope to maintain access to skilled EU migrant workers. Currently ninety per cent of businesses recruit EU citizens and over two-thirds (69%) recruit overseas, non-eu workers. Faced with a cost increase to hire skilled talent from outside the EU, just over three in ten firms (31%) would absorb the cost and continue to hire. Three in ten (30%) firms would hire fewer skilled migrants through the Tier 2 route (skilled work visas for non-eea migrants). Nearly a quarter (23%) of firms reported cost increases would lead to them offshoring parts of their business while less than a fifth (17%) would invest more in the training of their domestic workforce. Impact of the cost of living on accessing skilled talent in the capital The cost of living in the capital clearly impacts on a firms ability to recruit and retain skilled talent. Over two thirds of firms (69%) say high housing costs impact on their ability to recruit and retain skilled talent, over a third (35%) say the same about transport costs and under a third (31%) about housing availability. Tackling the cost of living in the capital will be crucial in attracting and retaining the people our city needs to thrive. 23% Nearly a quarter of firms reported cost increases would lead to them offshoring parts of their business

12 Priorities for the new Mayor of London As the Mayor and his senior team settle into their roles, businesses have made clear the priority areas they would like to see addressed over the next mayoral term. Delivering on affordable housing is the number one priority, just followed by ensuring the Mayor plays a role in influencing the UK s negotiations with the EU. On transport, businesses want to see sustained investment in the London Underground network.

13 The top three priorities for the new Mayor of London, Sadiq Khan have been cited by businesses as: 54% Focus on delivering affordable housing in the capital to rent or buy 53% 48% Influence the UK s negotiations with the EU Deliver Transport for London s road and rail investment plan With transport highlighted as one of the top priorities in the last CBI/ CBRE London Business Survey, this survey highlights the top transport projects for London firms: Top priorities for the Mayor 67% 55% 31% Upgrade to the existing London Underground network Commitment to commence construction of Crossrail 2 Investment in the capital s road network

14 About the survey The London Business Survey was carried out between 28 June 2016 and 17 July We received 186 responses, many directly from CEOs of leading companies which represent approximately 418,000 employees. Professional services was the largest sector, covering 24% of the total sample, followed by banking, finance & insurance (21%), energy, manufacturing & construction (14%) and creative industries, information, communications & technology (9%). About the sponsor CBRE s capabilities extend broader and deeper than any other real estate services provider, offering unparalleled tools and resources, leverage, credibility, market coverage and local expertise. London s dynamic real estate market demands the full spectrum of these specialisms to ensure market-leading advice. At CBRE our uniquely integrated London team of over 200 local experts, achieve this by leveraging our scale, perspectives and connections to create world-class solutions to our clients most demanding real estate challenges. This combination and approach achieves exceptional outcomes through the advantage we create for our clients in everything we do. About the CBI The CBI s mission is to promote the conditions in which businesses of all sizes and sectors in the UK can compete and prosper for the benefit of all. To achieve this, we campaign in the UK, the EU and internationally for a competitive business landscape.

15 For the CBI Lucy Haynes CBI London director T: +44(0) E: For CBRE Adam J Hetherington Managing director, London T: E: adam.hetherington@cbre.com John Kent Executive director, London T: E: john.kent@cbre.com

16 For further information on this document, or for a copy in large text format contact: Sana Nabi Assistant director, policy T: +44 (0) E: sana.nabi@cbi.org.uk September 2016 Copyright CBI 2016 The content may not be copied, distributed, reported or dealt with in whole or in part without prior consent of the CBI. Product code: 11528