London skies darken as confidence dips

CONFIDENCE among London firms has plummeted to an 18-month low. But firms in the capital are still far more optimistic about business prospects than those in the rest of the country, thanks to the buoyant business services sector.

A poll of nearly 900 accountants by the Institute of Chartered Accountants found confidence has dived in response to the consumer spending downturn and worries about the sky-high oil price and uncertain global outlook.

The survey's confidence index for London is 7.6 compared with a national average of 1.7. But the capital's reading is well down on the 12.6 seen in March.

Tony Morwood-Leyland, president of the London Society of Chartered Accountants, said: 'It would appear the positive outlook of the high concentration of niche businesses in London, many supplying public sector needs, has outweighed the effects of concerns in the banking, insurance and finance sectors regarding oil prices and the global slowdown.'

The capital's firms expect turnover to rise 6.2% over the next 12 months, against 6.8% in the past year. Profits are seen up 5.8% as opposed to 6.1% a year ago. Investment spending will increase 3.4% and staff numbers 2.9%.

The survey also found skill shortages are easing, while many firms believe London's transport situation has improved. However, respondents in the capital are more concerned about rapid staff turnover than any other region in the country.

The national picture revealed confidence among firms in the Midlands has nose-dived, with sentiment hammered by the collapse of MG Rover at Longbridge and the financial crisis at Coventry-based Marconi. Optimism has also been replaced by pessimism across the South-East.

Today's report chimes with recent surveys showing London weathering the economic slowdown better than the rest of the country.

Bank of Scotland last week said the capital's economy would expand about 4% this year, well above the 2.5% national average, putting the superior performance down to strength in the financial and business services sectors.