UK small businesses adopt increasingly cautious hiring stance

London – 30 October 2025 – UK small business sales and jobs are still growing but losing momentum following a reasonable start to the year, according to the latest Xero Small Business Insights (XSBI) data from Xero, the global small business platform.

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. This likely reflects both 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 unclear, there are signs that small businesses are adopting a more cautious approach to hiring. In the three months to September, 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.

Interest rate cuts offer some relief

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 good 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.

Small retailers prepare for seasonal surge

As small businesses prepare for the busy end-of-year 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, 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 regional breakdowns, small businesses in the South East demonstrated the strongest performance in the September quarter. Sales grew 4.0% y/y (the second strongest) and jobs rose by 2.6% (the strongest). 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. However, London still hasn't returned to its previously held position as a clear outperformer, compared to the rest of the UK.

“It might feel like the odds are stacked against small businesses. The rate of growth remains below long-term averages and uncertainty around the future outlook is creating a sense of inertia,” commented Kate Hayward, UK Managing Director at Xero. “For those feeling under pressure, staying on top of cash flow and having a solid understanding of your numbers can help. By understanding the ins-and-outs of your business, you can make confident decisions that set you up for success.”

You can find the latest Xero Small Business Insights UK Update here. To find out more about how Xero Small Business Insights is constructed, see the methodology.

Note to editors

The COVID-19 pandemic caused significant volatility in many datasets, including XSBI. To account for this the XSBI jobs data series previously had a 'COVID-19 adjustment' made to it. Sufficient time has now passed since the end of the pandemic period to remove this temporary adjustment. As a result, historical XSBI jobs growth data has been subjected to larger than usual revisions in this latest publication.

ENDS

Media Contact

Xero Communications UK | Sophie Whitney | ukpress@xero.com

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