By Daniel Hunter

Businesses in the capital expect to start hiring as normal again in the next six months, after a period of only taking on essential recruits in the first half of 2012, according to the latest CBI/KPMG London Business Survey.

The Olympics brought a noticeable boost to employment which has now fallen back to more modest growth levels.

In the December survey of 168 London companies, 61% said they would be hiring as normal over the next six months, compared with only 16% who said this in July. The numbers reporting a recruitment freeze fell from 51% to 31%, and those making redundancies shrank from 31% to 21%, over the same period.

This ray of light for the capital’s employment prospects comes at a time when firms still remain cautious about the economy. Of the respondents 40% feel more optimistic about the prospects for the economy over the next six months, while 22% feel more pessimistic.

The impact of the Eurozone crisis, the threat of another recession, and the lack of a clear Government strategy to deliver growth were cited as the top three concerns for London firms over the next year. The difficulty that companies are facing obtaining credit was ranked fourth, up from sixth in July.

On a positive note, London’s competitiveness continues to rise according to its businesses, with 92% rating the capital as a good or very good place to do business (up from 86% in July).

This comes after a successful Olympics, with the vast majority of firms (92%) saying the Games will help promote London internationally and a quarter saying they have benefited directly. On transport, London’s businesses think that all modes are improving, with the exception of air connectivity.

“It’s really encouraging news for London that the hiring freeze seen earlier in the year has begun to thaw and more companies are now getting back to recruiting as normal," Sara Parker, CBI Director for London, said.

“While firms are still cautious about the economy, 2012 has been an upbeat year for the capital and many firms are feeling buoyed by our Olympic success and are positive about London as a place to invest and do business.

“Now we need London companies to use the springboard of the Games to break into new high-growth markets. The support of the Mayor to promote the capital’s businesses around the globe will be crucial to this, but firms also want to see urgent action to improve airport capacity.”

Richard Reid, London Chairman of KPMG, said: “London is becoming an even more attractive place to invest and do business, especially with the added glow of a successful Olympics under the city’s belt.

“Transport is vital to the capital’s strength, so it’s good to see that firms think that most areas are improving. The Chancellor’s announcement of a funding commitment for the Northern Line extension to Battersea in his Autumn Statement was also great news for London. Let’s hope that HS2 gets off the drawing board soon, and we also need a solution for our overburdened airports, so that London does not lose out to other cities in attracting international business.

“We need the Mayor to pay particular attention to tackling the lack of affordable housing in the capital, which is a growing concern for London’s businesses and their employees.”

Respondents think that improvements have been made across all forms of transport over the last six months, apart from air connectivity, which the majority say is getting worse. London businesses are very clear that progress needs to be made on this front, putting ‘increasing air capacity’ at the top of their list for infrastructure needs. This is followed by overhauling roads, building Crossrail 2 and improving river and waterway networks.

London’s top three strengths remained the same as six months ago — access to global markets, skills and talent pool, proximity to customers and clients. In terms of weaknesses, the availability and affordability of housing moved into the top three, displacing transport:

- Overall operating costs
- Tax environment
- Housing

Companies highlighted the following measures as priorities to drive growth in the UK:

- Increase lending by banks to businesses
- Give go ahead on key new infrastructure projects
- Help UK companies to do business with emerging markets

On the Olympics London businesses said:

-92% think they will help promote London internationally
- 87% think they have helped give a positive image of east London
- 82% think they will boost tourism
- 65% think they have improved transport.

Over half of respondents (55%) are now confident that enough is being done to ensure a positive long-term legacy from Olympics — up from 46% in July and only 35% a year ago.

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