13 March 2024 , 10:44
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Small businesses saw their wage bills rocket by 14% at the end of last year, indicating ongoing cost pressures across the sector, a new report has revealed.
The latest Sage small business tracker, put together with the Centre for Economics and Business Research, found that while earnings growth is slowing down across the UK, total wage bills are still rising quickly for small firms. The report showed that small and medium-sized enterprises (SMEs) saw wages increase by 13.8% in the final three months of 2023, up from a growth of 11.1% in the previous quarter.
This rise comes even though wage growth is slowing down nationwide, with official figures on Tuesday showing that regular pay, excluding bonuses, fell back to 6.1% in the three months to January the slowest growth for more than a year. The report highlights the ongoing wage cost pressures faced by small firms as they struggle to attract and keep workers, even though other costs are going down.
The report stated: "Following the pandemic, wage growth within small businesses as all businesses has picked up markedly. This reflects the ongoing tightness of the UK labour market, where workers have gained increased bargaining power, as well as the increased cost of living."
Sage said its data is "proving more volatile compared to the Office for National Statistics data, indicating small businesses experience more wage growth variability than the wider UK economy". The report, which looks at Sage Accounting and Payroll data from over 136,000 UK businesses, shows that prices might still go up.
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The Bank is monitoring wages because it wants to control inflation. But with small companies paying more in wages and the national living wage going up to £11.44 an hour in April for nearly three million people, some worry this could stop the Bank from getting inflation under control.
The report also flagged the resilience of the small business sector despite the woes in the economy.
It found that small business revenues went up by 0.9% over a year in the last part of the year. Also, what people earn on average went up by 23.2% in the year to the fourth quarter. This is happening even though the UK economy went into a recession at the end of 2023.
The report also said that even though wages are a lot higher, other costs are beginning to ease, with overall costs 1.8% less in the year to the fourth quarter, That's the biggest drop in costs in 2023.
Derk Bleeker, chief commercial officer at Sage, said: "Small businesses are continuing to show signs of weathering tough economic conditions."