London feels heat as skills gaps and transport chaos hit ability to compete

Six out of 10 business leaders in London fear the city’s competitiveness is under threat – double the number of a year ago – research has revealed.

The poll of 118 senior executives found the credit crunch and poorly-handled tax reforms had badly damaged the UK as an attractive business location, according to the latest CBI/KPMG London Business Survey.

While the volume and value of business activity is still growing, it is doing so significantly more slowly than in the past. As a result, the proportion of businessmen and women pessimistic about their firm’s prospects over the next six months has jumped from 5% in March 2007 to 28%.

Away from tax and finance, the capital’s creaking road and tube network was the biggest cause of concern for employers, shadowed by worries over skills levels.

Overwhelmingly, London Underground was cited as the top priority for transport investment. And two-thirds (64%) also said London’s roads were getting more congested. To tackle these problems, the business community wants new London mayor Boris Johnson to make sorting out the transport system his first priority.

On skills, 72% of executives complained that they are currently unable to fill some skilled job vacancies – but they were hopeful that the new migrant points system will help.

Richard Reid, London chairman at KPMG Europe, said: “This report clearly shows that businesses in London are feeling the impact of the downturn in the economy. Many of its findings should be setting off alarm bells for policy-makers that urgent action is needed to tackle the weaknesses that will compromise London’s reputation and competitiveness.

“Tackling skills shortages will be helped by education authorities equipping students with basic and employability skills that businesses need, not just paper qualifications.”

CBI director-general Richard Lambert, added: “The message is clear – business is getting more difficult in London, partly because of the global economic slowdown, but also the more particular problems of transport and skills.”