Fears over high inflation and interest rate rises have driven confidence among London firms down to its lowest level in 18 months, new research claims.
A report, by the London Chamber of Commerce, claims that only 2 per cent of businesses in the capital expect the economy to strengthen over the next year.
The figure compared to 11% during the first three months of 2004 and 41% recorded in the final three months of last year.
As a result, the LCC believes pessimism for the future has reached its highest level since the build to the Iraq war 18 months ago, with worries over increases to interest rates and inflation dictating business confidence.
Nearly three quarters of business respondents predicted the borrowing rate would rise over the coming 12 months, while 49% feared inflation would worsen during the same period.
Derek Sach, LCC president, said: "Concern over the future trajectory of inflation and interest rates continue to act as a drag on the economy.
"The volatility of oil prices is reinforcing the concerns which many businesses harbour about growth prospects for next year."
The LCC research is the latest in a chain of recent studies suggesting London businesses are under increasing pressure.
Lloyds TSB found a rising number of companies were suffering cash flow problems while the London Retail Consortium (LRC) said September's retail sales dropped by 0.8% compared to the same month in 2003.
