Business activity in London fell again in May as the coronavirus lockdown sparked more redundancies amid falling demand, a new report says.
The headline NatWest London Business Activity Index showed that while the rate of decline fell from record lows in April, there were still substantial declines in employment and business activity.
The PMI index measures the month-on-month change in the capital’s business activity, with any figure below 50 showing a decline. In April the figure was at a record low of 13.4 in April. It recovered to 30.3 in May - still the second-fastest rate of decline in the survey’s history.
NatWest said: “Anecdotal evidence indicated that business closures and a lack of confidence led to weaker demand. That said, some firms saw clients return to activity and place new orders.”
Meanwhile staff numbers at London companies fell for the third month in a row.
NatWest said: “The rate of reduction was steep and quicker than the UK trend, but nevertheless softer compared to April. Firms often reported lower work requirements amid the lockdown, leading to both redundancies and furloughing of staff.”
Firms in London were less optimistic about the future than the UK average, even though levels of optimism rose on April.
Stuart Johnstone, managing director, London & South East corporate and commercial banking at NatWest, said: “Private sector firms in London continued to face challenging business conditions in May. Despite a partial relaxation of lockdown rules in the second half of the month, full restrictions in early-May and subdued client demand meant that business activity fell considerably. However, rates of decline in output, new business and employment eased.
"Companies made further use of the government's furlough scheme, amid greater efforts to shed cost burdens in this uncertain period. Some firms also managed to lower rental costs, driving overall expenses down for the second month in a row. This enabled large price discounts to be made, as firms prepared to win customers once demand recovers.
"Meanwhile, the Future Activity Index returned to positive territory, signalling that optimism is beginning to improve as the Government looks to relax more of the lockdown measures in June."
