An improvement in jobs and sales growth across UK small businesses in June “has been largely offset by increasing late payments and a slowdown in wages growth,” according to the latest data from global small business platform Xero.
Xero’s Small Business Index, based “on anonymized and aggregated data from hundreds of thousands of small businesses, rose three points across May and June, recovering slightly after falling by 11 points in April.”
After 14 months of year-on-year (y/y) decline, small businesses finally “saw tentative jobs growth in June, increasing by 1.1 percent compared to last year.” It marks a welcome boost “to the number of people employed by small businesses.”
Across the last three months, the strongest average monthly jobs growth “was seen in the information, media and telecommunications sector (+4.2 percent y/y), while hospitality (-5.1 percent y/y) and retail (-3.9 percent y/y) businesses continued to struggle.”
In line with previous trends, London led the way “with jobs growth (averaging +1.7 percent y/y in the three months to June).”
This tight labor market has “continued to push up wages for small businesses, however, the rate of growth has slowed slightly.” In June, wages “rose 3.6 percent y/y , the smallest y/y rise since December 2021.”
Modest sales growth in June but overall trend is still soft
Sales revenue rose 7.6 percent y/y in June, “but this came after rises of just 1.8 percent y/y in April and 0.4 percent y/y in May – leaving the average for the June quarter at just 3.3 percent.”
Sales growth also remains far “below the average throughout 2022 (15.2 percent y/y).”
As inflation remains high, “selling goods and services is an uphill battle for small business owners.” Using the June quarter CPI as “a proxy for prices, sales volumes actually fell an average of 4.4 percent y/y in the three months to June.”
Alex von Schirmeister EMEA Managing Director, Xero, shared:
“The combination of inflation, rising costs and squeezed consumer spending makes for a very challenging environment, and it’s unacceptable that payment times to small businesses have continued to grow.We hope that the June results mark the start of a sustained growth in small business employment. But the very weak sales growth for April and May show that business owners are struggling. It’s a reminder to us all about the importance of supporting local small businesses.”
Payment times to UK small businesses “by their suppliers have continued to creep up in recent months.” In June, the average time “to receive payment stretched to 29.9 days, up from 29.2 days on average in 2022.”
Perhaps more concerning is “how late these payments were.” On average, small businesses were paid 7.9 days later than “the agreed payment terms in June 2023, and significantly higher than the average of 6.4 days observed throughout 2022.”
von Schirmeister said:
“It’s heartbreaking to see late payments continuing to impact small businesses. We’ve been calling for greater action and hope to see some positive policy changes following the UK government’s prompt payments consultation due out any day now.”
The Xero Small Business Index is part of the Xero Small Business Insights program.
As covered, Xero claims it is “a global small business platform with 3.7 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects.”
Xero also claims that it has “an extensive ecosystem of connected apps and connections to banks and other financial institutions helping small businesses access a range of solutions from within Xero’s open platform to help them run their business and manage their finances.”