London business confidence dented

A TRIPLE whammy of worries about inflation, interest rates and oil prices has knocked business confidence among London firms to its lowest since the run-up to the Iraq war.

A balance of only 2% of firms in the capital believe the economy will improve over the next year against 11% three months ago and 31% six months ago, says a report from the London Chamber of Commerce. It is the lowest reading since the first quarter of 2003, when confidence was battered by the threat of war with Iraq.

Nearly half the firms quizzed expect inflation to rise while almost three-quarters think interest rates have further to climb despite growing speculation in the City that borrowing costs are at or near their peak.

LCC president Derek Sach said: 'Concern over the future trajectory of inflation and interest rates continues to act as a drag on the economy. The volatility of oil prices is reinforcing the concerns which many businesses harbour about growth prospects for next year.'

Confidence in the London economy is also trending downward. A balance of 11% of firms are upbeat about the capital's prospects against 14% three months ago. Today's report is the latest in a flurry of surveys suggesting London firms are feeling the pinch. The London Retail Consortium said retail sales growth in the capital went into reverse last month while Lloyds TSB reported a growing number of London firms experiencing cashflow difficulties.