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London leads the way for growth but risks abound

May 02, 2024 Rory Traynor Updated On: May 2, 2024
London leads the way for growth but risks abound

Whilst growth in the wider UK continues to struggle in the wake of the COVID years and ensuing macroeconomic challenges, London has enjoyed a much more successful bounce back and is starting to pull away from the rest of the country, with its growth expected to beat that of the rest of the country over the next few years.

The capital not only has seen a strong economic recovery, but has also outperformed any other region for growth over the last few years. This looks set to continue as London contains the highest number of high growth potential companies and because schemes to encourage regional growth in the UK have been largely unsuccessful. With less than 20% of leveling up initiatives having been completed and widespread chaos in regional councils, London’s pull to businesses, especially start-ups, has only strengthened.

Greater London currently is home to 122,373 companies, the highest in the nation, which are showing a strong propensity to grow by 20% or more in the next twelve months. What’s more, 91,000 of these are undergoing growth in a financially strong position and represent a low credit risk.

This is significant as often high growth companies need to churn through cash, which leaves them limited operating capital at any given time and leaves them vulnerable to any interruptions in cashflow, which in turn makes them a somewhat of a credit risk.

The robust financial health of London’s high growth companies is further good news for the capital as it creates an increasing reliable source of revenue for other businesses.

The sectors with the most companies with a high growth propensity are:

  1. Professional, Scientific & Technical Activities – 24,475
  2. Wholesale & Retail – 16,976
  3. Information & Communication – 15,968

Whilst the outlook for London’s economy is undoubtedly sunny, directors must remain vigilant as it also contains a high level of companies at risk at failure. With over 89,000 companies currently presenting a credit risk, practicing thorough financial due diligence and credit risk procedures remains of the highest importance.

But for those firms able to screen credit risks and avoid bad debt, our country’s capital city offers an unparalleled selection of up and coming companies to do business with.

Published by Rory Traynor May 2, 2024

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