Although small-business sales rose 4.5 per cent year-on-year (y/y) in July, this is down from 6.1 per cent y/y growth in June and well down from the 20.8 per cent y/y growth in May.
Stripping out price impacts using the July ONS Consumer Price Index (CPIH) of 8.8 per cent y/y, sales growth last month was due to price rises rather than small businesses selling more goods or services, with sales volumes falling 4.3 per cent y/y.
The softness in sales was felt particularly strongly by small businesses in the retail sector, which saw sales fall by 6.9 per cent y/y as rising costs put a squeeze on consumer spending. Only small businesses operating in the information, media and telecommunications sector (+9.6 per cent y/y), administrative support (+13.3 per cent y/y) and rental, hiring and real estate (+9.0 per cent y/y) had faster nominal sales growth than inflation.
Jo Copestake, UK sales director, Xero, said it’s a challenging time for many small businesses across the country, especially for independent retailers who’ve experienced another significant decline in sales.
“This month’s figures suggest that consumers have less disposable income to spend, which is not surprising given the headlines we’ve seen about inflation and increases in the cost of living such as energy prices,” she said.
The index also revealed that the average wait time for small businesses time to be paid rose by 0.4 days to 30.4 days. This is the fourth consecutive monthly rise in this measure, taking the average time for a payment to be made 1.6 days above the 2021 average of 28.8 days. On average, payments to small businesses by their suppliers were made 8.3 days late in July, which was 0.7 days longer than in June.
According to another recent Xero survey of large organisations, late payments offenders can no longer plead ignorance – more than three in four (78 per cent) admitted they are aware they are paying their suppliers late and understand the impact it can have.
“It’s disappointing to see that many small firms are not being paid the money they’re owed on time,” continued Ms Copestake.
“Most large businesses are fully aware of how delays in payments can impact their suppliers, limiting their ability to pay for bills, resources and staff. We’ve been advocating for some time now that we move away from calling this ‘late payments’, which legitimises poor practice and lacks urgency. It should instead be called ‘unapproved debt’ to highlight that this is a conscious hoarding of money that is owed to small businesses.”
Despite an increase in wages of 4.8 per cent y/y growth, small-business jobs fell by 4.5 per cent y/y – the same decline as in the year to June 2022. Offering higher wages to compete for staff is putting more pressure on small businesses, which can’t afford additional costs in the context of declining real sales and further delays to payment times.
The two weakest sectors were once again manufacturing (-8.6 per cent y/y) and construction (-8.9 per cent y/y). Administrative and support services (+1.4 per cent y/y) was the only sector where there were more jobs than in July 2021.
While London continued to record positive jobs growth (+3.1 per cent y/y), the lead-up to hosting the Commonwealth Games in August did not help the West Midlands jobs market, which recorded the largest fall in jobs of any region (-6.7 per cent y/y).
