London businesses optimistic for future economic growth, KPMG says
The vast majority of private business owners in London have recorded rocketing optimism about their growth prospects, but concerns surrounding the impact of inflation remain, according to the latest KPMG private enterprise barometer survey.
Following a challenging first financial half of the year, with businesses hit with tariff turmoil and ongoing geopolitical tensions, confidence in London increased to the “highest level” in the UK, up from 88 per cent at the start of the year.
Anna Purchas, London office senior partner at KPMG UK, said, “Leaders in London are entering the business end of 2025 with the highest level of growth confidence we’ve seen across the UK this year.”
Hungry for more
In the wake of tough macroeconomic conditions causing markets to suffer, more leaders are growing an appetite for private equity investment. Three fifths of respondents, recorded being open to private sources of capital to support growth and long-term resilience.
Technology development continued to dominate as a leading investment priority, with 74 per cent identifying implementing AI and cyber security as a key focus.
A growing number of firms are looking to diversify in order to boost revenue, with nearly 80 per cent considering introducing new service lines and expanding their client offerings.
Three quarters of businesses are also targeting entry into new markets, spiking from 58 per cent in January, in a bid to secure stable long-term growth.
“It’s clear that technology remains a top priority…coupled with strong ambitions to diversify and a growing interest in new sources of finance, this suggests that London’s business community is focused on long-term growth,” Purchas said.
Despite the optimism, inflation continues to loom over owners, with nearly 50 per cent citing it as the most pressing concern.
Interest rates and rising employment costs were identified as the next biggest worries, with 31 per cent of business leaders viewing them as a risk to growth.
National outlook and Budget hopes
While London owners lead the way in confidence, the national average also paints an encouraging picture for wider economic growth, with 93 per cent of respondents optimistic for the months ahead.
Similar to owners in the capital, technology development and innovation remains the dominant focus, but interest in sustainability and ESG dipped, with businesses hesitant to invest in sustainability projects until the government cements its net-zero policies.
Looking towards the autumn Budget, businesses identified increased investment in research and development and the introduction of new measures to help boost profitability, as key to unlocking further growth.
Euan West, head of KPMG private enterprise in the UK and EMA said, “Private businesses have continued to show resilience and adaptability in the face of these challenges, which is reflected in their steady levels of confidence about the future.”
“All eyes will now fall on the autumn Budget to see if the concerns of private businesses are addressed.”