I worked closely on Brexit during my last two years in the Foreign Office as Boris Johnson’s adviser. Not unreasonably then I am often asked: “So what do you think is going to happen now?”
Increasingly I find the only honest answer is: “I haven’t the faintest idea”. So these are unusually uncertain times. But businesses can’t choose, like me, to opt out of predicting. They have to find some way of continuing to act, to serve their customers, while being unsure what the future will bring.
We can see the results of their collective assessment in the survey which we at the London Chamber of Commerce & Industry (LCCI) carry out every three months.
Our ‘Capital 500’ quarterly economic survey is London’s biggest business survey. Independent research company ComRes polls a representative sample of over 500 businesses about how the last quarter has been for them and what they expect in the next one.
As I said in my last column, LCCI will be campaigning on the fundamentals in order to create the conditions that allow businesses to create wealth and prosperity for those who work in London.
The results from this survey add to the business intelligence from our members, helping to choose the issues on which we make a case to City Hall and beyond. So, what did the first quarter of 2019 tell us? It tells us that business confidence is low, and domestic and export sales are falling.
We have been carrying out the Capital 500 in its current format for over five years now, and it is the first time that all export and domestic demand figures are in negative territory.
The cashflow balance also fell to a record low for the second consecutive quarter, and employers are coming under increasing wage pressures. The survey also shows that companies face recruitment difficulties – normally the symptom of a booming economy. Indeed, unemployment is at its lowest level nationally since 1974, and in London the first quarter of 2019 saw an increase in the number of companies attempting to grow their workforce.
But 63% of those that tried to do so encountered difficulties securing the right candidates.
It is worrying that these symptoms are evident while the economy is growing so slowly by historic standards – a sign perhaps of the damage that has been done to our productive capacity by the way the economy has been managed since the crash. We are going to have to grapple as a city and a country with big issues such as the availability and affordability of housing, skills provision, training and reform of the apprenticeship levy, availability of high speed broadband connectivity, and many others.
Getting the right immigration system for London post-Brexit will also be important. A reshaped immigration system after Brexit could, if not carefully designed, make the skills availability challenge even worse for businesses in the short run.
The Capital has a far greater reliance on international workers than many other parts of the UK. We at LCCI think the proposed salary threshold of £30,000 is probably too high, as that level could make it even harder to recruit for vital roles across London. I was pleased to read last week that some in the government are proposing to look again at this point.
Equally, we must ensure that as a country we have the right skills system in order to ensure UK nationals can access the full range of employment opportunities that London is able to generate. Skills shortages can be a sign that too many Londoners are missing out on these opportunities.
As the think tank Centre for London highlighted just last week, London is the number one global city for foreign investment in company HQs. The next Prime Minister and the next government will need to take some tough decisions if we are to keep it like that.