| Red tape and transport network are the greatest threats to London's prospects |
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| Written by Adrie van der Luijt | |
| Saturday, 08 December 2007 | |
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Crumbling infrastructure and a rising tide of red tape will undermine London's ability to compete with New York and Tokyo, a CBI/KPMG survey of business leaders has revealed.
The capital is a good place to do business, the respondents said, but under-investment in infrastructure and regulation will threaten its competitiveness over the next five years. Two-thirds of respondents to the London Business Survey from the CBI and KPMG said the government and the London mayor need to boost investment in roads, rail and airports. Only a quarter praised the capital's transport network quality and reliability while three in ten said it was poor. Four-fifths believe it is damaging London's reputation as a world city. Traffic-choked roads are the main problem: two-thirds of business leaders condemned them as poor, compared to 8 per cent who described them as good. Despite the introduction and expansion of congestion-charging, half of respondents said the road system is getting worse. Only 6 per cent felt it is improving. Third runway Gatwick and London City airports were well-regarded while Heathrow got a mixed scorecard with 40 per cent saying it was good or satisfactory and half saying it was poor. Almost unanimously (85 per cent), business leaders believed it is important that a third runway is built at Heathrow, subject to meeting environmental standards. London Underground was cited as poor by four in ten respondents compared to a fifth who thought it was good. More encouragingly a third think it is improving. Buses and trains are performing well and thought to be improving, although respondents want trains to have more carriages and run more frequently. Cost of compliance The second main threat to competitiveness, the CBI/KPMG survey revealed, is a rising tide of red tape and the cost of compliance. Over the last three years increased regulation in the US after the Enron scandal has diverted a great deal of business from Wall Street to the City of London. But US legislators are now keen to reclaim the mantle of the world's financial hub for New York and are cutting red tape while firms fear it is on the rise in London. Four in ten respondents (42 per cent) cited increased regulation as a danger to the capital and almost two thirds (62 per cent) said the cost of compliance had risen over the past six months. This rose to three-quarters (74 per cent) among banks, financiers & insurers while half of professional services firms said the cost had increased. Big firms are feeling the impact most with 88 per cent of businesses with annual turnover between £250-500m reporting a rise, and 73 per cent with £500m+ turnover. The rising cost of regulation is also being felt outside the City with the distribution, retail & hotels sector particularly hit, and transport and property firms also concerned. First class transport network Ian Barlow, London Senior Partner at KPMG, said that London needs a first class transport network system to shine as a global city but that the current system is struggling to cope. "Despite significant investment on the capital's Underground, roads and railways, the network is still overwhelmed at peak times making it a real struggle for our people to get to work. This has damaging consequences for competitiveness," he said. He added that since Crossrail and the Thameslink rail upgrade are a long-way off, it is important existing works, such as the Tube modernisation, continue to be financed and completed on time and are not delayed because of the Metronet situation. "Equally, good air links are vital to UK businesses in a global economy and the government needs to act swiftly to ensure Heathrow can expand to meet demand," Barlow said. Harm existing businesses in the UK John Cridland, deputy director-general of the CBI, said: "London is prospering on the back of light touch regulation and a willingness to embrace overseas talent and capital. "So it is worrying that the capital's employers say that compliance costs are on the rise and that this poses a real risk to competitiveness. This will not only harm existing businesses in the UK which, in an increasinly global and mobile world, might be tempted to move away, but also deter fresh investors to the UK," Cridland added. He warns that the Government must remain vigilant in keeping the UK economy as competitive as possible, particularly compared to rivals keen to attract business away from the UK. Recruiting from overseas The survey also found that two out of three firms expect to be troubled by skills shortages over the next six months, and the majority (58 per cent) are already recruiting from overseas to fill gaps. Almost a third of those turning overseas said they were increasing their recruitment from outside the UK, with most bringing in people with higher, degree-level skills. Three-fifths of firms said the Olympic Games will offer direct business opportunities and three-quarters believe it will boost their involvement in the local community. Almost all respondents have a contingency plan to cope with incidents such as a terror attack, flu pandemic or natural disaster. Only 46 per cent have tested it in the past year. Half of firms have measured their carbon footprint and three-fifths have a plan to cut emissions, but this falls to a quarter among smaller firms. A third of businesses will give their staff a Christmas bonus this year. Half said it will be the same as last year, a fifth said it will be more. Related articles |
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