Firms in London saw resilient growth in activity and new work throughout November, buoyed by stronger demand both locally and internationally. While sales improved, many companies opted to keep prices competitive, despite a notable rise in input costs.
The headline London Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – recorded 55.7 in November, down slightly from 55.9 in October. The index signalled a robust expansion in private sector activity, which businesses linked to new customer acquisitions, catching up on existing projects and optimism that work levels will pick up after the Budget.
London maintained its position as the UK’s leading region in terms of output growth in November. Overall, UK business activity rose for the seventh consecutive month , though only marginally.
Catherine van Weenen, Territory Head of Commercial Mid Market at NatWest, said: “The capital’s economic performance remained robust as we approach the end of 2025, with companies seeing further improvements in market demand and activity. The latest uplift is particularly encouraging given reports that cautious consumer and business sentiment ahead of the Budget had subdued spending, with the increase in new orders being the slowest in four months.
“Despite the strong uplift in activity, London businesses were wary of increasing their prices due to strong competition and pressure from clients to keep fees low. Consequently, selling prices rose marginally, which marked the lowest inflation rate in nearly five years of consecutive price increases. With input costs rising, firms in the capital were prompted to make workforce reductions. This led to a steep decline in employment, which more than offset a modest uptick in October.”
image.png
Performance in relation to UK
The capital enjoyed an uplift in demand volumes for the fourth consecutive month in November. Surveyed companies remarked on new projects and the onboarding of both domestic and overseas clients. However, some firms noted that customer spending was cautious in the run-up to the Budget, which led to a softer pace of total sales growth compared to October. Despite this, the overall increase remained robust and contrasted with a slight decline in sales across the wider UK.
Business expectations in London were down markedly after reaching a 13-month high in October. That said, they remained close to the long-term trend and only marginally better than the national average. Where firms maintained a positive outlook, they cited hopes of securing new business, benefiting from long-term investments, and improved macroeconomic conditions driven by lower inflation and interest rates. Conversely, some companies expressed caution due to customer uncertainty.
London firms made substantial adjustments to their staffing levels during November. Employment fell at the quickest rate for nine months, a sharp reversal from October’s marginal rise. While some companies cited unexpected workforce declines, the majority pointed to increased redundancies aimed at reducing expenses and counteracting wage inflation. Conversely, a few firms expanded their staff in response to stronger sales.
Job losses across the capital were consistent with the rest of the UK, as all 12 monitored areas registered lower employment figures. On a national level, staff numbers declined at the steepest rate since February.
Backlogs of work across the private sector continued to decrease in November, marking a full year of ongoing depletion. This suggests that most businesses had sufficient capacity to handle rising workloads and complete existing projects.
The latest survey data revealed a widening gap between firm’s input costs and their selling prices in November. Average input prices continued to rise at a rapid pace that surpassed the long-run average and was more pronounced than in October. Panellists frequently cited higher staff costs, alongside increased fees for software and air freight.
Despite this, output prices across the London private sector showed little movement, with the seasonally adjusted index falling to its lowest level in 57 months and just slightly above the 50.0 no-change threshold. Firms noted that intense market competition and client pressure to keep charges low had diminished their pricing power. A marked slowdown in output charge inflation was also observed across the UK as a whole.
