Confidence among London business chiefs about the prospects for the UK economy plunged amid concerns over the Budget and new rights for workers, according to a new survey.
However, nearly half of companies in the capital still expect their turnover to increase this year, the analysis by the London Chamber of Commerce and Industry (LCCI) found.
Inflation continued to be the “primary concern” for London firms at the end of last year.
Karim Fatehi, chief executive of LCCI, said: “2025 will be a year of cautious optimism for London businesses emerging from the volatility of an election super-year.
“While firms are confident about their own prospects, concerns over the broader UK economy persist due to rising costs, disappointing fiscal policies, and ongoing labour shortages.
“To drive long-term growth, the Government must address business concerns around rising employer costs, reduced business rates relief, and the Employment Rights Bill.
“Stability, certainty, and supportive policies are crucial for London’s businesses to invest, innovate, and contribute to the UK’s prosperity.”
The survey of 500 London businesses found that predictions for Britain’s economic health plunged in the last quarter of 2024 which the LCCI stressed reflected “growing concerns about measures announced in the Autumn Budget and the Employment Rights Bill”.
Less than a third of businesses in the city now believe the UK economy will improve over the next 12 months.
But 48% of firms in the capital expect their turnover to grow in the next year.
Nearly half, 48 per cent, of businesses also expect their profitability to rise over 2025.
However, optimism varied by business size.
Profitability expectations among micro-firms rose from +25 in the third quarter to +31 in the last three months of 2024, while among larger firms it fell from +59 to +52.
Business chiefs have hit out at the £25 billion National Insurance hike for employers in Rachel Reeves’ Budget in the autumn, as part of a £40 billion tax raid, with some £30 billion more borrowing, to spend a further £70 billion, including a huge cash injection for the ailing NHS.
The Chancellor’s plans for economic growth have been dealt a double blow with the Pound hitting a 14-month low and the cost of Government borrowing soaring, which will hit the public finances unless the situation changes.
Mortgage rates for millions of homeowners may also be pushed up.
More than half of businesses in London identified inflation as their top challenge in the last three months of 2024.
Rising energy and fuel costs were also a “significant burden”, with 61% of businesses reporting higher energy costs and 50% citing increased fuel costs during the last quarter.
The LCCI highlighting that bosses were reporting a stagnant labour market.
While 14% of firms said their employment levels had grown in the previous three months, 18 per cent stated they had decreased.