Business confidence in London has plunged to its lowest level on record, with a leading industry group directly blaming the Labour government's new workers' rights legislation for the downturn.
Survey Reveals Capital's Hiring Hesitancy
The London Chamber of Commerce and Industry (LCCI) has issued a stark warning following its latest quarterly economic survey. The study, which polled 500 business leaders across the capital, found that just one in four London firms believe the local economy will improve in 2026. Expectations for the national economy were even lower.
The data indicates a significant cooling in the jobs market. In the final three months of 2025, only 25% of businesses sought to recruit more staff. This marks a sharp fall from the second quarter of the year, when over a third of companies were looking to hire.
"Punitive" Reforms Blamed for Stifling Growth
Industry officials have pointed the finger squarely at the impacts of the Labour government's Employment Rights Bill. Karim Fatehi, chief executive of the LCCI, stated that while employment protections are vital, the balance has tipped too far. He warned that "employers are increasingly reluctant to hire as they face greater costs and risks."
Fatehi emphasised that economic growth is contingent on business stability, arguing: "There is no economic growth unless businesses have the confidence they need to take risks, invest, hire and expand." The chamber described the workers' rights reforms as "punitive" and a key factor making bosses think twice before expanding their workforce.
Political Pressure Mounts Ahead of May Elections
The downturn sets the stage for a challenging political climate. London Mayor Sadiq Khan recently suggested in a Mansion House speech that the rise of Artificial Intelligence posed a threat to the jobs market, particularly to white-collar roles in business and financial services. He described AI as a potential "weapon of mass destruction" for such positions.
However, this explanation may not alleviate voter concerns about the capital's economic prospects. With crucial elections across London's 32 boroughs scheduled for May, the issue is becoming a key battleground. Reform's chief London campaigner, Laila Cunningham, has said results will serve as a verdict on voters' opinions of Mayor Khan.
The Labour government will be hoping to avoid a heavy defeat in its traditional heartland. Significant losses could increase pressure on Prime Minister Keir Starmer's leadership, especially given his frequent policy clashes with Mayor Khan on issues ranging from Gaza and Ulez to taxation.
