UK small business sales growth continued to slow over the last quarter (July to September), not helped by rising late payments times, according to the Xero Small Business Insights (XSBI) data from Xero, the small business platform.
As noted in the research report, this quarter, small retailers continue to experience “weak sales growth, while hospitality had its softest summer sales growth since the pandemic lockdowns of 2020.”
Small businesses are yet to see the impact on consumer spending following the Bank of England‘s decision to “cut the official base rate by 0.25 percentage points in August.”
The retail and hospitality sectors also had some of “the slowest jobs growth this quarter at +0.4 y/y and -0.4 y/y respectively.”
Small businesses experienced only a modest “1.9% y/y growth in sales for the September quarter, down from 4.5% y/y growth in the June quarter (April to June).”
This slowdown was most evident in the last two months, with “a 0.7% y/y decline in August and a marginal 0.1% y/y increase in September.”
The Bank of England‘s interest rate cut has yet to benefit the small business economy, with “consumer-sensitive sectors like retail and hospitality experiencing sales drops of 3.6% y/y and 0.2% y/y respectively.”
In contrast, education and healthcare sectors “showed resilience, growing 5.7% and 6.1% y/y, respectively.”
There is cautious optimism that the possibility of “even lower rates may boost sales in the coming months, with two further Monetary Policy Committee meetings due between now and the end of the year.”
Small businesses continue to face “tough conditions, with consumer spending still constrained by increased everyday expenses.”
Average late payments, beyond the invoice “due date, increased to 6.4 days in the September quarter, up from 6.0 days in the previous three months.”
This spiked in September, with the “average payment 6.7 days late.”
SMBs are also said to be “waiting longer to receive payments, with the average time between issuing an invoice and being paid remaining high at 28.4 days, compared to 28.3 days in the previous quarter.”
Although many regions experienced challenges this quarter, the North East of England posted the “strongest sales growth of any region at 4.5% y/y in the September quarter.”
The region has been the ‘best-performing” for the past 12 months, bucking the national trend with “consistently better-than-average small business sales.”
This aligns with recent research findings from NatWest’s Growth Tracker, indicating that economic growth in the North East has “picked up, driven by increased activity in sectors such as manufacturing.”
The Natwest research also showed hiring “by the region’s small businesses also hit its highest level in three years.”
In contrast, Scotland, which has reportedly led the United Kingdom in sales growth in 2023, saw its figures slow to “just 1.6% y/y, marking the weakest growth among UK regions over the last quarter.”
As covered, Xero is a small business platform. Xero’s tools help small businesses manage accounting functions like tax and bank reconciliation, and complete other tasks like payroll and payments.
Xero’s ecosystem of apps and connections to banks and other financial institutions provide solutions from within Xero’s open platform to help small businesses manage finances efficiently.
