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Survey of London businesses reveals a mixture of optimism and caution about the year ahead

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Businesses in London are more upbeat than they have been in 18 months about prospects for the coming half-year, though they remain cautious about future investment and divided about London's status as a world city, a CBI/KPMG survey revealed today.

Caution about investment plans is evident from the fact that almost a third (30%) are planning to cut back on recruitment and training.

The tenth biannual CBI/KMPG survey shows London's businesses have used a variety of HR strategies to retain skilled staff and survive during the recession. New questions in the survey reveal that, while over half (53%) have been forced to make redundancies, staff have also been working with their employers to implement policies such as only recruiting when essential (63%), using HR policies to cut costs like expenses (37%) and putting a freeze on hiring altogether (26%).

As a result of the recession, the proportion of firms recruiting staff from overseas has fallen back. In this survey, just 3% said hiring from abroad was rising, compared with 15% a year ago, and 26% said it was stable, compared with 42% in 2008. Those firms that are recruiting from outside the EU, and using the new points-based system (37%), were asked about its impact on their ability to recruit: 57% said the system was causing them some difficulty; 5% said it was causing great difficulty and 38% reported ‘no impact'. No firm said it was actively helping them to recruit.

But fewer than a third (30%) feel the 2012 Olympic Games will strengthen the capital's skills base.

Most (80%) feel that financial incentives are the best way to encourage firms to take the green agenda further and 45% say better advice and support would help. Just 23% say more regulations would encourage them to invest more in low-carbon solutions.

Richard Reid, London chairman of KPMG, said: "While it is encouraging to see London's businesses feeling more confident, it is important that the lessons learned over the past two years are kept at a high priority for all companies. It is also important that policy-makers and the Government pay close attention to maintaining our position as a global financial centre as the world slowly starts to emerge from recession.

"The capital is facing challenges on many fronts; not just from the tough economic conditions but from new emerging financial centres, and there is real concern of a regulatory backlash that could make the City less attractive to overseas investors and businesses."

Nigel Bourne, director of CBI London, added: "The fact London's businesses feel their most positive for 18 months suggests the darkest days of the recession should be behind us. But the capital's strong reliance on the financial services sector, and fears about its ability to compete against tough international competition are leading to uncertainty about London's future status as a world city."