London’s businesses are navigating a delicate balancing act. After years of economic shocks, from the pandemic to persistent inflation and tighter monetary policy, confidence in the capital is recovering-but unevenly. The latest ICAEW Business Confidence Monitor (BCM) for London offers a detailed snapshot of how firms across the city are feeling about the months ahead: where they see prospect, where pressures are mounting, and how they plan to respond.
Drawing on the views of chartered accountants at the heart of decision‑making, the BCM distils sentiment on sales, investment, employment and the broader economic climate. For policymakers, investors and business leaders, it is a barometer of the capital’s financial health-and a window into how London’s economy might evolve as it adjusts to new trading realities, changing consumer behavior and ongoing global uncertainty.
Economic sentiment and sector performance in London revealed by the latest ICAEW Business Confidence Monitor
London’s latest BCM readings capture a capital that is cautiously shifting from crisis management to calculated growth. Finance and professional services continue to underpin confidence, but the survey highlights that sentiment is no longer the sole preserve of the Square Mile. Technology, media and creative industries are reporting brighter revenue expectations, supported by strong export pipelines and ongoing digital transformation agendas. At the same time, rising wage pressures and office occupancy uncertainties are tempering optimism, especially among smaller firms that lack the balance-sheet resilience of larger corporates.
Across the city, sector performance is diverging in ways that reveal how businesses are adapting to a high-cost, high-competition environment. Respondents point to a clear split between opportunity-led expansion and defensive cost control:
- Financial and professional services are maintaining robust pipelines, with many firms focusing on advisory work linked to restructuring, M&A and regulatory change.
- Tech and digital services report rising client demand for automation and data analytics, offsetting weaker fundraising conditions.
- Hospitality and retail remain under pressure from elevated input costs and shifting consumer habits, though tourism-linked venues are showing early signs of recovery.
- Real estate and construction face mixed fortunes, with commercial office projects slowing but retrofit and housing activity offering selective momentum.
| Sector | Confidence trend | Key driver |
|---|---|---|
| Financial services | Moderately positive | Deal flow and advisory demand |
| Technology | Improving | Digital transformation projects |
| Hospitality & retail | Fragile | Cost pressures and volatile footfall |
| Real estate | Mixed | Shift to flexible and green space |
Investment intentions hiring trends and productivity challenges across London’s business landscape
Capital spending plans across the City and beyond remain cautiously progressive, with firms prioritising digital transformation, regulatory compliance and low‑carbon upgrades. While appetite for major fixed-asset projects has cooled, survey responses indicate a pivot towards agile, lower-cost investments that promise quicker returns and resilience against policy and market shocks. Boardrooms are sharpening their focus on:
- Automation and AI to streamline workflows and augment decision-making
- Cybersecurity as a core infrastructure spend, not a discretionary add-on
- Green retrofits to meet tightening environmental standards for offices
- Cloud migration to support hybrid operations and cross-border teams
| Priority Area | Hiring Trend | Key Productivity Challenge |
|---|---|---|
| Finance & Professional Services | Targeted growth in risk, tax, data | Legacy systems slowing client delivery |
| Tech & Digital | Strong demand for developers & AI talent | Talent churn and wage inflation |
| Retail & Hospitality | Selective rehiring in frontline roles | Skills gaps and inconsistent service quality |
Across sectors, recruitment plans are increasingly selective rather than expansive, favouring specialist capabilities that lift output per head instead of simply expanding headcount. Employers are grappling with structural constraints that weigh on productivity, including soaring commercial rents, transport bottlenecks and stretched management capacity in high-growth scale-ups. To offset these pressures, firms report intensifying efforts around:
- Upskilling and reskilling existing teams to close digital and analytical gaps
- Flexible work models that balance office collaboration with focused remote work
- Process redesign to cut low-value tasks and reallocate staff to higher-margin work
- Data-led performance tracking to pinpoint where productivity is stalling
Risks pressures and opportunities facing London firms from inflation to regulatory change
Rising input costs, wage demands and higher financing rates continue to squeeze margins across the capital, forcing management teams to reassess pricing power and cost structures in real time. Many are turning to flexible staffing models and renegotiated supplier contracts, while closely monitoring how far they can pass on costs without eroding demand. At the same time, tighter credit conditions are sharpening focus on cashflow forecasting and covenant compliance, particularly for mid-market businesses reliant on revolving facilities.Against this backdrop, regulatory updates ranging from ESG disclosures to digital reporting rules are increasing complexity and compliance spend, but also encouraging firms to invest in better data systems and governance frameworks.
These pressures are not purely defensive; they are creating new avenues for growth and differentiation. London businesses are looking to advisory-led services, tech-enabled efficiencies and international expansion to offset domestic headwinds. Many finance leaders report that regulatory and macroeconomic uncertainty is accelerating the shift towards automation, scenario planning and more frequent board-level performance reviews. Within this environment,firms that can combine agility with strong controls are better placed to attract capital,talent and customers.
- Cost dynamics: Persistent inflation in services and property, plus rising salary expectations.
- Regulatory evolution: Greater scrutiny on ESG data, audit quality and digital record-keeping.
- Financing conditions: Higher borrowing costs and more conservative lending standards.
- Strategic response: Investment in technology, risk analytics and diversified revenue streams.
| Key Factor | Main Risk | Emerging Opportunity |
|---|---|---|
| Inflation | Margin compression | Value-based pricing |
| Regulation | Higher compliance burden | Stronger governance credibility |
| Interest rates | Costlier debt | Focus on capital efficiency |
| Technology | Implementation risk | Automation and insight-led growth |
Policy lessons and practical recommendations for strengthening business confidence in the capital
Recent BCM findings underline that London’s economic narrative hinges on predictable policymaking, streamlined regulation and visible support for investment. Businesses consistently highlight the need for faster planning approvals, clearer guidance on emerging rules – particularly around ESG reporting and digital compliance – and more reliable infrastructure delivery. Targeted tax incentives for capital spending and innovation, alongside improved access to growth finance for scale-ups, would signal long-term intent and reduce the drag of uncertainty on hiring and expansion decisions.
Turning these insights into action requires closer collaboration between City Hall, Whitehall, local authorities and the private sector, with a sharper focus on execution rather than announcements. Practical steps include:
- Stabilise the policy environment with multi-year frameworks for business rates, transport funding and skills programmes.
- Cut friction by digitising licensing and planning processes, with clear service standards.
- Back innovation clusters in fintech, life sciences and creative industries through targeted infrastructure and skills initiatives.
- Deepen international reach via trade missions and investor roadshows that showcase London’s sector strengths.
| Policy Area | Business Need | Recommended Action |
|---|---|---|
| Regulation | Clarity & speed | Single digital gateway for guidance |
| Tax & incentives | Reward investment | Enhanced relief for green and digital assets |
| Skills | Future-ready workforce | Co-designed training with employers |
| Infrastructure | Reliability & capacity | Priority pipeline for transport and digital |
In Summary
As London’s businesses continue to navigate a landscape shaped by inflation, higher borrowing costs and uneven demand, the ICAEW Business Confidence Monitor offers a timely snapshot of both risk and resilience in the capital.The data suggests that while growth expectations are moderating and cost pressures remain acute, many firms are still planning to invest, hire and adapt their operations.
For policymakers, the findings underline the importance of stability and targeted support to maintain momentum in key sectors.For business leaders, they highlight where confidence is holding up – and where vulnerabilities lie.
In a city that has long thrived on its ability to adjust to change, the latest BCM results serve less as a verdict and more as a barometer: signalling that London’s economy is not immune to headwinds, but remains positioned to respond, provided that both public and private actors act on the insights the data provides.
