SME employment growth set to flat-line through 2025 – London Business News | Londonlovesbusiness.com

Job growth across UK SMEs collapsed ahead of the Government’s Autumn Budget, data from a comprehensive new report shows.

Employment Hero’s SmartMatch Salary Report uses real-time data from 90,000 employees across small businesses with 1-500 employees in the UK.

The most recent data, collected at the end of October when the Government announced a massive ‘job tax’ on new hiring by increasing National Insurance Contributions by 1.2%, reveals that the rolling six-month average for annual employment growth in full-time jobs has fallen to just 2.6%. This is a sharp decline from 12.8% in October 2024 and indicates that growth has been essentially flat over the last three months.

Monthly data showed a slight recovery in full-time job growth in September and October, suggesting employment growth will plateau rather than crash.

The recovery came after a steep decline in hiring around the July general election, with many employers seemingly pausing new hires in anticipation of the outcome.

Full-time employment growth slowed to just 0.9% in the three months to August, a drop from 3.8% in the previous three months to June.

Employment decline in the North worsens wage gap 

Full-time employment in the North of England dropped by 3.3% over the past year to October, as hiring slowed across several sectors and overall job numbers declined.

This was possibly related to a contraction in Manufacturing, Transport & Logistics, which saw full-time employment drop 1.5% in the year to October.

Other sectors and areas had a better 12-months for full-time employment growth, with the South (excluding London) growing by 2.9%, Greater London by 2%, and Scotland by 1.2%.

This likely contributed to the persistent North-South wage gap – the average (median) full-time employee in Greater London earned £42,000 a year, around £9,000 more than the average full-time employee in the North of England who made £32,770.

Employment Hero UK MD Kevin Fitzgerald said, “These figures should be a wakeup call to the Government – employment growth is already shrinking at our small and medium firms and the tax hike on job creators is only going to make things worse.”

“Looking at the data, we’re expecting a mix of slower employment growth and rising hiring costs to put real pressure on SMEs through 2025. This is particularly tough news for regions like the North of England, where employment is already contracting and wages are still trailing behind. We need consistent job growth to keep our economy moving forward – staying flat will only mean more people out of work as our population continues to grow.”

“While larger firms can absorb additional costs, SMEs operate on much tighter margins. The National Insurance hike will make many small business owners think twice about creating new roles, just as employment growth is naturally cooling off. The Government talks about supporting small business growth, but this policy does the opposite – it makes hiring more expensive just when SMEs need all the help they can get.”