UK small business revenue and jobs are still said to be growing somewhat steadily but losing momentum after a fairly reasonable start to 2025, according to the Xero Small Business Insights (XSBI) data from Xero, the global small business platform. The research report noted that small business jobs growth for the September quarter stood “at 1.1% year-on-year (y/y) but slowed consistently over the quarter – from 1.6% y/y in July to 1.1% y/y in August and just 0.7% y/y in September.”
According to the research study shared by Xero, this most likely reflects softer sales performance and heightened levels of uncertainty, with “shifts in international trade policy and concern about potential tax rises in the upcoming Autumn Budget.”
With the outlook remaining fairly unclear or uncertain, there are now “signs that small businesses are adopting a more cautious approach to hiring.” In the 3 months to September 2025, the proportion of small businesses “growing their workforce fell to 26.4% in the quarter, its smallest share since mid-2020 when the UK was in lockdown.”
Meanwhile, the number of small businesses “downsizing their workforce grew to 24.4%, the highest level in two years.”
Small business sales also continued to grow at “a slower rate in the September quarter.” Sales were up “3.1% y/y, although this was the smallest rise in 18-months and below the rate of inflation making the result a decline in inflation-adjusted (real terms).” In some seemingly positive news for small businesses, the Bank of England’s interest rate cut did offer “some respite, with sales spiking at 4.5% y/y in September, up from only 1.1% y/y in August.”
As small businesses get ready for the busy EOY shopping season, retail emerged as the industry bucking the “slowdown in jobs growth.” Small retailers recorded the “strongest” jobs growth across all tracked industries “at 3.3% y/y for last quarter, with many likely preparing for the seasonal uplift.”
Despite this, the research report shared by Xero revealed that overall sales growth stood at “1.1% y/y – the lowest of all sectors, pointing to the still challenging environment many are operating in and highlighting the importance of supporting small businesses in the upcoming festive period.”
In terms of the overall regional breakdowns, small businesses in the South East demonstrated the “strongest performance” in the September quarter. Notably, sales are said to have increased 4.0% y/y (the second strongest) and jobs rose by 2.6% (the strongest). Meanwhile, in London, sales grew “3.9% y/y but jobs grew only 1.0% y/y.” This was a relatively better performance, “compared to other regions, than in the June quarter.”
But London still has not returned to its previously held position “as a clear outperformer,” when compared to the rest of the United Kingdom.
