London Chamber of Commerce warns confidence is slipping

Following an encouraging finish to 2010, key performance indicators for the most recent quarter have either fallen or stayed at much the same level, suggesting that business confidence in London is faltering, the LCCI warned.

Two of the most notable results showed that 40 per cent of firms had seen their cash flow worsen recently, up from 31 per cent last quarter, while just 44 per cent of companies now expect to see their profits rise in the months to come, down from 51 per cent.

There were falls in other key economic indicators including turnover, output and domestic sales, while export sales and investment remained at much the same levels.

When asked to rate their own company's prospects, fewer than half of employers (45 per cent) say they expect things to improve, down from 53 per cent when asked three months ago. They are even less confident about the state of London more generally, with just 32 per cent saying they expect the capital's economy to grow, down from 37 per cent in the previous quarter.

When asked about broader economic trends, London's businesses are not optimistic about inflation being kept under control the LCCI continued, with 75 per cent expecting inflation to continue to rise in the next year, up from 58 per cent predicting this last quarter. On a related point, 81 per cent of firms are expecting to see interest rate rises in the next twelve months, up sharply from 47 per cent when last asked.

Peter Bishop, deputy chief executive of the LCCI said: "The first few months of the New Year were frankly a disappointment as companies in the capital endured lukewarm trading conditions. Doubts seem to be persisting about the strength of the global economy which in turn has led to many firms adopting a more cautious approach in their business dealings.

"The government must do all it can to help the business community while the economy struggles, in those areas in which it has real power. Tackling red tape would be a great start and we urge departmental Ministers to think twice when introducing new legislation and look at those areas where rules and regulations can be simplified or even scrapped."