London firms most upbeat for 18 months but worries persist

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A survey by the CBI and KPMG today showed 47% of firms are optimistic about their prospects over the next six months, the highest proportion since April 2008.

Nearly nine in 10 firms said London is a good place to do business, although many are worried about the state of the transport system, high taxes and too much red tape.

A quarter of bosses at the 124 firms interviewed said they think London's standing will shrink compared with cities such as New York, Paris, Tokyo and Mumbai in the next five years.

The CBI said it was vital that Crossrail, the east-to-west rail route through London, is completed on time in 2017 and called for further upgrades to the Tube network.

Nigel Bourne, director of CBI London, said: "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.

"Seeing through vital improvements to London's creaking transport infrastructure, especially on the Tube and railways, will be key to encouraging future investment."

Firms also complained about congestion on London's roads and nearly three-quarters backed the building of a third runway at Heathrow.

Richard Reid, London chairman of KPMG, said: "It is 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."