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Rising operating costs are tightening the squeeze on London businesses, with 61% reporting higher energy bills in the last quarter, according to the London Chamber of Commerce and Industry’s latest quarterly economic survey.
As a result, nearly half (44%) expect to raise their prices in the next three months, as concerns grow about how long firms can continue to absorb rising costs.
With pressures mounting, many businesses see the forthcoming Budget as a critical moment.
While firms are calling for targeted tax breaks and incentives to ease the burden, confidence in government support remains low and fears of impending tax rises are increasing.
Ministers at last week’s Labour Party Conference stressed that fiscal restraint is vital to steady the economy, but business leaders in London warn they cannot withstand additional tax rises without jeopardising growth and jobs.
Business confidence in Q3 reflected this tension. Less than half of London businesses (48%) expect profitability to improve over the next 12 months, with optimism lowest among SMEs. Meanwhile, signs of strain remain. The share of businesses anticipating a fall in turnover rose to 18% (up from 16% in Q2), reflecting ongoing vulnerabilities, particularly amongst smaller businesses and service providers.
Recruitment intentions show a similarly uneven picture. While nearly a third (31%) of firms plan to increase headcount in the next quarter, only 3% anticipate reductions. Inner London businesses reported greater staffing pressures than those in outer boroughs, pointing to a more challenging operating environment in the capital’s core.
Against this backdrop, both domestic and export demand has demonstrated a cautious recovery. While the share of firms reporting higher domestic orders increased by 2ppts compared with Q2 to 26%, export activity was slightly more modest, with 12% of London businesses reporting an increase in export orders.
The data illustrates a slight improvement in London businesses’ optimism about the UK economy, as 31% anticipate it to improve in the next 12 months, up from 29% in Q2. Despite this, sentiment remains uneven and guided by the broader economic landscape, with concerns about inflationary pressures, tax burdens and rising competition mounting. In fact, well over half (55%) of London businesses were more concerned about inflation in Q3 then the previous quarter.
Liz Giles, Policy and Communications Director of the London Chamber of Commerce and Industry (LCCI) said, “We are entering the final months of 2025 with a mixed picture of the business environment and London economy.
“On the one hand, we are seeing fewer businesses reducing headcount, stabilised export activity and greater levels of optimism about the economy as a whole. Yet, on the other, businesses are nervous ahead of the Chancellor’s upcoming Budget, in what many of our members are anticipating to be another blow to their bottom line.
“Recent announcements, such as the commitment to revitalise high streets across the UK, are a positive step in indicating close collaboration with, and support of, local communities and the businesses upon which their survival lies.
“In order to rebuild business confidence in the long term and illustrate that it is serious about driving sustainable growth, the government must commit to listening and acting upon the concerns of London’s business community.”
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