The challenges that are facing the blue chip businesses forming the FTSE 100 index have been laid bare by a new survey from global legal services firm DWF.
The 2018 “City of London: Blueprint for Growth” report contains polling results from 150 c-suite executives from FTSE 100 companies, across a range of business sectors and with headquarters in the capital.
Key among the findings is the impact of Brexit: business leaders are paying close attention to the EU negotiations, knowing that they will have a huge impact on the UK economy.
The largest barrier to growth is the uncertain political climate resulting from these negotiations, according to 63 per cent of UK businesses polled, up 12 percentage points from the previous year.
“London’s position as a pre-eminent global financial hub has been without question for centuries, but the impact of Brexit is on course to disrupt the city’s international relationships and create challenges and opportunities for London-based businesses,” DWF says.
There are other interesting findings. Executives were polled on why their business headquarters are located in London. Last year, 63 per cent of businesses cited the capital’s reputation as the main financial centre of Europe and the world as their top reason. That’s fallen to 55 per cent this year.
The threat posed by Brexit to London’s reputation as a financial hub is causing some businesses to consider relocating – in March, consumer goods giant Unilever announced its intention to move its headquarters to Rotterdam. However, other factors are understood to be influencing Unilever’s plans, with Dutch MPs set to debate the role tax changes may have had in the decision.
On a much more positive note, London’s reputation as a centre for technological innovation and its blossoming start up scene is still helping to attract businesses.
This reputation is now the top reason for choosing London as an HQ, according to 57 per cent of executives, up from 36 per cent last year.
“Across the board, businesses stated London’s tech start up scene as one of the key reasons they are based in London. However, London’s tech businesses seem to be very concerned about what the future may hold, and what Brexit might mean for both their business and their workforce,” the publication says.
Access to the EU’s Single Market is another Brexit-related issue causing concern, as 43 per cent of businesses cited this as a major reason for being located in London, up from 23 per cent the previous year.
And while parliament debates whether the UK should remain a member of the EU’s internal market and the customs union, it is worth highlighting that 88 per cent of businesses said there would be no impact to UK investments, or that they would invest more, if the UK did not retain access to the Single Market. That’s compared to just 54 per cent last year, and shows a note of confidence in the UK economy.
However, there are concerns about how recruitment will be hampered by Brexit in the future. Talent attraction and recruitment is the third biggest barrier to growth facing businesses, as 74 per cent think it will be harder to recruit talent from abroad after the UK leaves the EU.
“With these challenges in mind business leaders are looking to change the agility and make-up of their workforce to establish stronger teams that are more diverse,” the research claims.
“With the economic benefits of workforce agility now widely understood, 83 per cent of London businesses (compared to 59 per cent the previous year) expect some proportion of their workforce to be working on a flexible basis in the next five years.”
Interestingly, businesses were also asked which cities they saw as posing the greatest competitive threat to London. Two long-term German rivals, Frankfurt and Berlin, dropped sharply from 45 and 49 per cent respectively to 33 and 42 per cent.
However, new threats are raising their heads – 60 per cent of businesses cited Amsterdam as London’s greatest threat, compared to 41 per cent last year. Chicago also saw a sharp rise from three per cent to 33 per cent.
Despite the uncertainty, embracing new technology is seen as key to growth strategies and will help overcome these Brexit issues. Data and analytics, automation, and artificial intelligence were cited as the most important tech trends for FTSE 100 companies.
“Smart investment in technology has the power to drive forward growth and strengthen London’s position as a global business hub.
“Only five per cent of those we asked did not think technological innovation was integral to their company’s business strategy in the next five years,” the analysis says.
While Brexit may present many challenges and opportunities to businesses, these findings demonstrate that London remains an attractive centre and that technological innovation could serve as a key differentiator for the capital in a post-Brexit economy.
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Author Luke Graham