London firms still waiting for Olympics 'dividend'

Continuing economic gloom means businesses in the capital will take on fewer staff, warns CBI

Business leaders in London have suffered a dramatic loss of confidence during the second half of the year, despite their growing excitement about the capital hosting the Olympic Games next summer.

The warning comes from the Confederation of British Industry/KPMG London Business Survey, a biannual audit of the mood of businesses in London. Just 13 per cent of respondents now feel more optimistic about the prospects for the economy as a whole over the next six months, down from 43 per cent in June, while optimism about their own prospects is down from 51 to 31 per cent.

The most worrying aspect of the fall-off in confidence is that many businesses are now taking a much more cautious approach to hiring staff. Two-thirds of London-based companies say they are now taking on additional employees only when they judge it absolutely essential to do so, while almost a quarter have strict recruitment freezes in place.

"It is clear that London business confidence has been knocked by the ongoing uncertainty in the eurozone and weak demand and growth at home," said Sara Parker, the London region director of the CBI. "We now need the Government to power ahead with its autumn statement plans to help businesses grow and create jobs."

Unlike other British cities, London does at least have the Olympics to look forward to, a major international event that will see visitors flood into the capital. Ms Lyons said the Games were a plus for London businesses, though companies still had some serious concerns.

"They are confident that the Olympics will benefit London internationally — the Games will showcase London as a world-leading business location, and highlight the success of UK firms in delivering a complex construction and infrastructure project," she added. "It is good news that the majority of the capital's companies are now thinking about planning for the Games, but there is still more work to be done over coming months to make sure transport, staffing and security issues are ironed out."

Richard Reid, the London chairman of KPMG, said the economy and the Games would be crucial in the forthcoming London mayoral election.