After various tax rises came into force last month, new data shows there has been a dip in SME employment amid a major job market slowdown.
The latest Intuit QuickBooks Small Business Index reports a 0.59% drop in employment across firms with under ten employees in April. This marks the first decline in five months.
The drop is no doubt a symptom of the challenges facing small businesses, such as rising costs and staffing pressures.
In this article, we’ll discuss the drop in SME employment, as well as suggest five practical tips from experts to help you cut costs and avoid making redundancies.
Why is small business employment dropping?
The latest research from QuickBooks by Intuit shows that jobs in small businesses declined rapidly in April compared with March. Almost 25,000 jobs were lost across businesses with fewer than ten employees, spelling the end of four consecutive months of growth.
The main cause of small businesses downsizing their teams is likely the rise in employer National Insurance Contributions (NICs) and minimum wage. The changes were announced in the Autumn Budget last year, but came into effect this year.
The impact of the changes on SME finances has been palpable, as many are pausing hiring while they figure out how to stay afloat. Hospitality saw the largest decrease, declining by 5,000 jobs (a 1.01% decrease). The sector was left reeling by the NIC rise announcement.
Inuit’s findings are echoed by a survey from Brown Shipley, which found that 38% of UK entrepreneurs will sell up shop earlier than planned due to last year’s Budget.
On a brighter note, employment has increased in 9 out of 13 sectors, with Finance and Insurance up 4.16%. London-based SMEs are so far still on the up, with a slight increase of 0.20%. Scotland has been the worst hit, seeing a significant drop of 3.86%.
Could AI spell the answer?
As tighter budgets and hiring slowdowns become the reality for business owners across the country, automation has emerged as a practical solution.
The aim is not to replace human staff, but to help leaner teams do more with less. By getting it right, your business can maintain growth amid a hiring freeze.
Sole traders and micro-businesses are increasingly embracing tools like automated tools like AI-assisted accounting platforms, CRM systems, and chatbots to streamline processes, save time, and cut costs.
Even in more traditionally manual industries, like hospitality, businesses are getting on board. With hospitality hardest hit by the employer NIC rise, many cafes, restaurants, and pubs have already adopted AI to ease the financial pressure.
But it’s important to remember that these tools should be a support, not a substitute. Last year’s AI craze saw some businesses rush to adopt automation and, in doing so, make sharp cuts to their teams.
Many now regret downsizing, so we’d recommend acting carefully when it comes to AI. Ultimately, it’s about giving stretched teams the breathing room to focus on what they do best, not making mass redundancies.
What else can small businesses do to stay resilient?
Pauline Green, Head of International Compliance at Intuit, has some handy tips for business owners to build resilience and get to grips with long-term financial planning.
34.6% of sole traders struggle to keep track of day-to-day expenses. Green says a good habit is to set aside 30 minutes a week to review your spending.
Whether it’s a spreadsheet or financial software, categorising your outgoings can help you spot potential savings and flag recurring charges. Follow our guide to creating a cash flow forecast for tips on what to include.
You should also get a basic grip on your numbers to help you ask better questions, have more productive conversations with your accountant, and avoid expensive mistakes. Start small, read a quick explainer on new tax changes, or dig into income reports each month.
For more tips on surviving the next 12 months on a positive growth trajectory, without making any job cuts, check out the Startups Workforce Report.
