Small businesses are often described as the backbone of the UK economy, and for good reason. The Federation of Small Businesses, a UK-based organisation representing small and medium-sized businesses, reports that small businesses had a combined annual turnover of £1.9 trillion in 2017 – 51% of the country’s entire private sector income.

There’s a lot at stake. They’re responsible for the livelihoods of a lot of us. In 2017, total employment by UK SMEs was 16.1 million: which is 60% of all private sector employment in the UK. So how do small businesses go about hiring these people? And how does it change throughout the year?

To gain insight into UK employment, we looked at anonymised, aggregated data drawn from hundreds and thousands of Xero subscribers in the UK. We were then able to measure the number of people on the payroll at each of these companies, and how that number changed from month to month. 

Growth months

This analysis demonstrated that, at 2.88%, 2017’s highest growth month in terms of hiring was March. And there are reasons for this.

March is a relatively high cash flow month. Businesses hire because they’re planning for the release of a new budget. So you’ve got to spend it while you’ve got it. This is supported by ONS statistics on the UK labour market. The months leading to March 2017 saw unemployment rates at 4.6% - a year-on-year decrease of 0.5% and the lowest since 1975.

Decline months

The worst months for employment growth tend to be October to December. It’s easy to see why: work for the year is wrapping up, and cash flow tends to suffer in January.

“We don’t hire people towards the end of the year”, Prof. Neil Barron, founder of bike security company Litelok. “It simply wouldn’t make sense. Senior managers are on annual leave, so there’s no one to introduce them properly to the business. They’re not working for a significant part of the month, and there often aren’t projects available for them to work on anyway.”

Fastest growing industries

For hiring, the fastest growing industries based on those businesses using our payroll services in 2017 were:

  • Information, Media and Telecommunications (27.3%)
  • Manufacturing (15.8%)
  • Health Care and Social Assistance (14.9%)

In the years ahead, recruitment activity will be sensitive to a number of social, political, and economic pain points. Training will be particularly important, and with this in mind, it’s heartening that the 2018 Spring Statement included £80bn in support for businesses to take on new apprentices. If initiatives like these bear fruit, 2018 may well be the year where growth is finally sustained.