The latest Xero Small Business Insights (XSBI) data from global small business platform, Xero, says UK small business hiring has continued to show signs of recovery in the face of a challenging macroeconomic environment. Employment has risen 1.4 per cent year-on-year (y/y) in the first quarter of the year (January-March 2024) representing the largest hiring growth in two years for UK small businesses.

Xero’s data also revealed that wage growth rose to 3.3 per cent y/y in the March quarter, from 3.2 per cent in the December quarter. Increasing wages are an indicator that small businesses are working hard to fill vacancies. This is particularly evident in the hospitality sector, which experienced above average wage growth at 4.0 per cent y/y, but only just above the national average at 1.8 per cent y/y growth in hiring.

Despite positive signs for jobs, small business sales growth remained slow, rising by just 0.5 per cent y/y in the March quarter. However, the weakness over the last three months was largely due to the month of March, when sales fell 4 per cent y/y, which can partly be attributed to the early Easter bank holiday, which hasn’t fallen in March since 2016.

Setting aside the unusual March data, the combined data for January and February showed sales rose 2.8 per cent y/y. This still represents slowing growth compared to the 3.1 per cent  y/y rise recorded in December. The retail industry has felt the biggest impact, with sales for small retailers falling 2.2 per cent y/y – the fourth consecutive month of year-on-year decline for this industry. In contrast, arts and recreation (+8.5 per cent y/y) and healthcare (+6.5 per centy/y) recorded the strongest growth.

Alex von Schirmeister, Managing Director, UK & Emerging Markets at Xero, said: “An appetite for hiring is a positive sign of growth amongst small businesses, but it doesn’t disguise the slow sales data we’ve seen over the last two quarters. There are some glimmers of stronger performance in Scotland and the North of England, but we need to see recovery across the UK.

“To accelerate this there are some preventable issues we can address immediately – small businesses must be paid on time. We’re still talking about late payments because our data shows it’s still getting worse. It’s crucial the government holds large firms accountable.”

The latest data shows small firms were paid, on average, 6.4 days late during January and February of this year1. This represents an increase of 0.6 days compared to the December quarter, following a decrease of 0.8 days in the second half of 2023. On average, small businesses had to wait 28.7 days to be paid – 0.3 days longer than the previous quarter.

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