UK small business recovery remains slow

London – 30 September 2021 – Small businesses saw stronger sales growth in August but jobs fell back below year-ago levels as the sector continues to feel the effects of the pandemic, according to the latest Small Business Index, from Xero the global small business platform.

The Index, produced in partnership with Accenture, is based on anonymised and aggregated data from hundreds of thousands of small businesses. It found that jobs fell to -0.9% year-on-year (y/y) , 1 after growth briefly moved into positive territory in July. However, these impacts were partially offset by a stronger sales growth result, up 5.1% y/y from 3.3% y/y in July - marking a sixth month of positive year-on-year growth.

This reflects the very real challenges facing small businesses as they try to rebuild and adapt to life post-COVID. The data suggests that jobs recovery in the UK has been slow. This contrasts with Office of National Statistics data showing national level vacancies in August at over one million - the highest number since records began two decades ago.

Despite the removal of all trading restrictions, jobs growth in the hospitality sector slowed further in August, down 10.1% y/y, from -9.2% y/y in July. Construction, manufacturing and retail trade also all experienced weaker jobs results.

Regionally, London and Scotland were the only two regions to see positive jobs growth, up 3.3% y/y and 0.4% y/y respectively. The south-west took a large hit, with jobs down 3.6% y/y.

Glen Foster - director, small business at Xero said: “Small business recovery won’t happen overnight. It’s positive to see that August marks six months of year-on-year sales growth, but as our data shows, the job market remains in a fragile state. With the furlough scheme coming to an end today, this instability will continue to have a huge impact on our economy.”

“While conditions remain challenging for many, it’s vital that the government creates the right environment for growth, particularly as we head into the winter months.”

Xero has identified the key areas small firms will need greater support to rebuild. The Road to Small Business Recovery includes recommendations on technology access and the creation of a growth economy to help small firms in their recovery. You can read this manifesto here.

Xero Small Business Insights is produced in partnership with Accenture.

More information on the August metrics, including industry and regional data, is available here.

-ENDS-

1 Typically, the Index compares year-on-year (y/y) data to reveal how the small business economy is faring. However, as the data from August 2020 was significantly impacted by the pandemic, all comparisons in this release have been made using annualised two-year growth to account for base effects.

About Xero

Xero is a cloud-based accounting software platform for small businesses with over 2.7 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognised by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.