Confidence hits a 5-year high

London is booming again, with business confidence at its highest since Labour came to power five years ago. The latest London Monitor survey shows the business community has fully shrugged off the effects of 11 September and dispelled the gloom that was evident before the terrorists struck.

Within the past fortnight, 280 executives of companies employing almost 200,000 workers across London have been questioned on behalf of the Standard and the London Chamber of Commerce and Industry.

In addition to the normal questions, this month's survey contains quarterly indicators that go back 12 years. These show the mood of London's community compares favourably with any time since Margaret Thatcher was Prime Minister.

The key indicator is the outlook for profits over the next 12 months - 67 per cent expect profitability to improve, while only six per cent expect profits to fall. This yields a net figure of plus 61 - the highest figure since late 1996. At the height of the boom times in 2000, it hovered between plus 53 and plus 55. In the aftermath of 11 September it slumped to plus five.

The bounce back is unprecedented, and suggests low interest rates, a buoyant housing market, and resilient consumer spending figures have fed their way through to London's business community.

Indeed, the most optimistic sector in terms of profits-growth is retailing - which was the gloomiest after 11 September. Many retailers say they had a difficult winter, with sales down and more shedding staff than hiring. But they now expect sales to pick up strongly, and four times as many expect to expand rather than contract their workforce.

Overall, 57 per cent of London companies expect to keep their workforce at current levels; but among the rest, the 31 per cent who expect to employ more people greatly outnumber the 11 per cent who expect to employ fewer. Apart from a few months in 2000, this is as high as at any time since Tony Blair became Prime Minister, and suggests fears of higher unemployment may well be confounded.

Optimism about jobs is spread among companies of all sizes and in all sectors.

The main reason for all this confidence is the consensus in London's boardrooms that Britain's economy is back on track. As many as 46 per cent expect growth to accelerate over the next 12 months - the highest figure since the peak of the 2000 boom - while just 11 per cent expect growth to slow down, the lowest for almost two years.

With just a week to go to Gordon Brown's sixth Budget, the survey contains a message for the Chancellor: forget about trying to appease the business community by fiddling with business taxes, and concentrate on getting the economy right. There is great support for measures that would lead to a lower exchange rate (38 per cent rate this as a high priority) and keeping down interest rates (36 per cent). The Chancellor's decisions affect the stance of the markets, which decide the exchange rate, and the Monetary Policy Committee of the Bank of England, which sets interest rates.

? London Monitor is conducted by market research agency IDA on behalf of the London Chamber of Commerce and Industry in conjunction with the Evening Standard. The raw data has been weighted to reflect the number of workers employed by each company. More information may be obtained from Piers Merchant at the LCCI: 020 7203 1898.