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A growing share of London businesses are optimistic about improving profitability over the coming 12 months, according to the London Chamber of Commerce and Industry, as it publishes its latest quarterly economic survey.
The upbeat outlook is underpinned by significant gains in domestic sales during Q2 2025. The proportion of firms reporting increased sales rose from 23% to 30%, the highest level recorded in over a decade.
This improvement in sales sentiment was seen across both large companies and SMEs.
Similarly, 31% of London firms reported an improvement in cash flow, an increase of 7pp versus Q1.
Recruitment activity also picked up during the quarter, particularly for part time positions.
Of the businesses hiring, 56% were recruiting for part-time roles, up from 36% in the previous quarter. Meanwhile, the proportion of firms filling full-time roles fell from 70% to 61%, though this remains higher than in Q4 2024.
This shift reflects a growing preference for flexible staffing arrangements as firms try to navigate meeting growing operational needs during economic uncertainty.
Despite this, and against the backdrop of ongoing geopolitical tensions and uncertain global markets, the strengthening domestic conditions contrast subdued export trends. In fact, just 9% of London businesses reported an increase in export orders last quarter, indicating weakening export demand.
Operational pressures remain a key concern for firms. Businesses continue to grapple with unprecedented operating costs across the board, driven primarily by utilities and fuel, with 66% of firms reporting an increase in energy costs in the last three months. Rising operating costs have been further exacerbated by wage pressures and inflation, the latter of which remains the dominant concern for London’s business community. Well over half (59%) of businesses were more concerned about inflation in Q2 than in the previous quarter.
Liz Giles, Policy and Communications Director of the London Chamber of Commerce and Industry (LCCI) said, “London’s economy shows signs of recovery, but momentum is uneven and fragile.
“Businesses are still weathering rising costs and labour shortages, particularly smaller firms that are taking a cautious approach to investment and scaling-up opportunities.
“The recent Infrastructure, Industrial and Trade strategies are welcome first steps, but the real challenge for government is restoring business confidence. This requires a long-term partnership with industry to understand how to unlock the critical levers that will drive economic prosperity for London and the rest of the UK.”
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