Nearly half of businesses surveyed as part of London Chamber of Commerce and Industry’s quarterly survey of 507 business leaders reported increased energy costs during Q3 2021, the highest volume saying so since LCCI’s Capital 500 survey started, back in Q2 2014.
46% of firms said energy prices had increased over the past three months, whilst 47% also reported rising fuel costs. Businesses are also faced with other increased costs, such as 42% saying their cost of domestic raw materials had risen, with 35% saying the same for international raw material costs.
The rising cost of energy and fuel was all the more acute for manufacturers, where 55% and 73% reported increases, respectively.
43% of firms are more worried about inflation than they were in the previous quarter. 36% of firms expect their prices to rise in the next quarter – the highest amount saying so since the Capital 500 began in 2014. This rises to 54% amongst manufacturers.
Despite this challenging picture, Q3 offered hope for inner London businesses, with 33% reporting increased domestic sales. This is double that of outer London businesses – where only 17% reported rising sales.
Since the start of 2021 the proportion of inner London businesses reporting increased sales has doubled (17% in Q1, 33% in Q3). But in outer London the increase in businesses reporting rising domestic sales is much smaller; 17% in Q3 compared to 14% in Q1.
Richard Burge, Chief Executive of London Chamber of Commerce and Industry, said: “It’s pleasing to see sales rising for London’s businesses during the third quarter. Inner London, particularly, reported rising sales through the till. It’s been a long time coming for many businesses. But sadly, revenue is being squeezed on several fronts by the cost of doing business. Firms are reporting rising costs of energy, fuel and raw materials. Their margins are under threat, they’re also mindful of rising inflation, and it is little surprise to see consideration being given to increasing the price of their goods and services. These are very real threats to our economic recovery from COVID-19.”
A further positive sign of London’s economic recovery from COVID-19 is indicated by the number of businesses trying to recruit increasing from Q2 (11%) to Q3 (17%), whilst hiring intention for the next three months also increased.
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