However, they remain cautious about future investment and divided about London's longer-term status as a world city, a CBI / KPMG survey reveals today.
The poll of senior executives shows that most firms still think the capital is a good place to do business, and more think so now (86%) than when the last survey was conducted in April (80%). Business performance has also improved, with fewer reporting falling business values (36%) than six months ago (59%).
Forty seven per cent of firms are optimistic about their future business prospects, which is the highest proportion since April 2008 (30%).
However, a perceived lack of government action on issues such as transport and skills, falling public sector investment and an overly burdensome tax and regulatory regime are seen by firms as threatening London's attractiveness as a place to invest and do business.
While a quarter of respondents say they see London's status improving in five years, another quarter think its standing will shrink compared with cities such as New York, Paris, Tokyo or Mumbai, and half say it will simply remain where it is.
Firms remain cautious about their investment plans. A third (30%) plan to cut back on recruitment and training and a further third (31%) on IT infrastructure, equipment, plant and machinery.
Commenting, Richard Reid, London Chairman of KPMG, said: "Whilst it is encouraging to see London's businesses feeling more confident, it is important that the lessons learned over the last two years are kept at a high priority for all companies. It is also important that policy makers and the Government pay close attention to maintaining our position as a global financial centre as the world slowly starts to emerge from recession. The Capital is facing challenges on many fronts; not just from the tough economic conditions but from new emerging financial centres, and there is real concern of a regulatory backlash that could make the City less attractive to overseas investors and businesses.
"Whilst an appropriate regulatory framework is critical for business success in a competitive world economy, policy makers need to ensure that they don't hamper London's ability to compete with other global centres by rushing in a raft of new rules which ties businesses in knots. London also needs to take a lead in Europe in helping the EU to emerge from recession in a much stronger position."
