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Small business hiring to slow down

12 June 2018

Small business hiring to slow downThe contribution of new SME workers to the UK economy is expected to drop by more than half over the next five years.

This is the conclusion of the latest CYBG SME Health Check Index, published in partnership with the Centre for Business and Economics Research (CEBR).

The SME Health Check Index measures business performance and the environment affecting SMEs, including net business creation, business costs, capacity, confidence, employment, gross domestic product, lending and revenue.

The latest results show that small business health rose by 3.4 points to 47.4 in Q1 2018, after five consecutive quarters of decline. Out of eight key indicators, lending, revenue, confidence and employment all saw improvements; poor GDP growth and a fall in the rate of net business creation weighed down the overall number.

However, the report predicts that SME hiring will fall in the coming years as the wider economy slows down and wage growth begins to accelerate. CYBG polled SMEs about their intentions to hire in the next six months and found that 6% fewer SMEs are planning to expand their workforce; a further 9% are expecting to reduce staffing levels.

SMEs currently employ around 16.1 million people, about 60% of the UK's total private sector employment. When asked what discouraged them from hiring in the future, small business owners cited: a fall in demand (50%); a worsening outlook for the UK economy (37%); an increase in employee costs (28%); an increase in other outgoings (24%); and the reduced availability of skilled workers (23%).

Gavin Opperman, group customer banking director at CYBG, said: "Despite the concern around SME hiring slowdown, our SME Health Check Index does show signs of optimism. However, it's still a mixed picture and the Index is well below the level we have seen previously.

"SMEs' contribution cannot be underestimated. We must … provide the right environment and support to help them flourish and continue being a major employer of the UK's workforce. In particular, we must give our small firms the access to talent they need post-Brexit and address how these firms can be incentivised to invest in skills."

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