London businesses see significant improvement in cash flow in Q2 2024 – London Business News

London businesses see significant improvement in cash flow in Q2 2024 – London Business News
London businesses see significant improvement in cash flow in Q2 2024 – London Business News

According to the report, London businesses experienced a notable improvement in cash flow in the second quarter of 2024. The capital 500the quarterly survey of the London economy, conducted by the London Chamber of Commerce and Industry (LCCI).

The net balance, which represents the percentage of people with an increase minus the percentage of people with a decrease, rose by 9 points to -2 in the second quarter of 2024. This is the highest level since the third quarter of 2021.

More than a quarter (27%) of companies reported higher cash flow in the second quarter, compared to 24% in the first quarter.

This positive trend included companies of all sizes. Micro companies (0-9 employees) saw their cash flow balance improve from -15 to -5, with 25% reporting an increase compared to Q1.

Larger companies (10 or more employees) also posted significant gains, with the net balance rising 7 points to +30, the highest level recorded by The capital 500.

The improvement in cash flow was mirrored by growing domestic demand in Q2, with 27% reporting higher sales, while 25% experienced a decline. This led to the net balance for domestic sales increasing by 7 points to +2, the highest since Q1 2022. Despite this increase, domestic orders were largely unchanged from Q1 to Q2, down just 1 point to -1.

This trend extended to export sales which also picked up during the quarter, with the percentage of firms reporting higher export sales increasing from 10% to 13%. This was mainly driven by micro-enterprises and firms in the service sector, particularly in retail and hospitality.

There were some positive signs of easing cost pressures, although the figures are significantly above pre-2022 levels. In Q2, 58% of companies reported higher energy costs in the past three months, the smallest share since Q3 2021 and down from 67% in Q1 2024.

Meanwhile, while only 5% of businesses saw a decrease in energy costs, there was still an 8-point drop in the net balance for energy costs to +53. At the same time, pressure on labour costs remains, with 44% of businesses facing increased wage demands in Q2 and 45% of businesses expecting their prices to increase in the next three months, up from 42% in Q1 2024.

Business confidence rose in Q2, with over half (52%) of London businesses expecting their profitability to improve over the next 12 months, compared to just 15% expecting a decline. This optimism pushed the net balance up 9 points to +37, setting a record for the QES.

Other key findings include:

  • Utility costs were the biggest factor driving up prices for 51% of businesses, followed by labour (41%), finance (33%), raw materials (29%) and fuel (22%). Meanwhile, inflation remains the biggest concern, with 59% of London businesses saying they were more concerned than they were three months ago.
  • Recruiting activity slowed in Q2 with 23% of companies attempting to recruit, down from 28% in Q1, marking a one-year low. Micro companies significantly reduced their recruitment efforts to 18%, down from 24% in Q1.
  • London’s labour market showed minimal movement in Q2, with the employment balance improving slightly from -4 to -3. However, larger firms experienced a significant drop from +14 to +4, marking a three-year low, despite generally positive expectations for the labour force.
  • Companies continued to show high levels of training investment, with the net balance reaching a record high of +14 in Q2. Micro companies reached a record balance of +12, while larger companies increased their training investment to +32, reflecting a strong commitment to workforce development.

The Capital 500 aims to assess private sector performance and confidence levels among businesses of all sizes in the capital. It is notable that some of the fieldwork for this latest QES was conducted after the announcement of the UK general election on 22 May 2024.

Karim Fatehi MBE, Chief Executive of the London Chamber of Commerce and Industry (LCCI), said: “With a new government coming to power, the latest insights from The Capital 500 reveal a strong rebound in cashflow for London businesses in the second quarter of 2024.

This positive trend not only reflects the resilience of our city, but also underscores the crucial role that economic stability plays in promoting growth and prosperity.

“While challenges remain, including cost pressures and inflation concerns, the improvement in business confidence, with more than half of companies expecting improved profitability, points to a hopeful outlook amid the changing political landscape.”