SMEs across the UK are “facing more woes” as they struggle to fill vacancies despite a strong 14.3% increase in year-on-year sales growth and a “record” 5% rise in wages, according to new data from Xero.
It found that SMEs are “struggling to compete with big business” when it comes to salaries, perks and job security, as late payments to small businesses reportedly increased in May, with the average time to pay rising by 1.1 days to 30.6 days.
In addition, the average payments were late by 8.8 days beyond the agreed terms, an increase of almost two days since the previous month.
According to Xero, a trend is beginning to appear as a “knock-on effect” on small businesses’ ability to manage their cash flow and meet the higher wage expectations.
In contrast to all other industries, sales by small businesses in retail fell by 1.3% year-on-year for the second consecutive month that retail sales have fallen. In May, it was the only sector to record negative sales growth. This data is said to highlight the impact of the cost of living crisis on businesses that rely on consumers who are spending less on the high street.
However, the hospitality sector is offering “record wages” as the summer season continues, with wages 7.7% higher last month than in May 2021. Attracting workers still remains difficult in the sector as jobs are said to be falling 3% year-on-year, however.
London was the only region to show jobs growth, at 2.3% year-on-year, while the West Midlands saw a “staggering” fall in jobs of 8.3% year-on-year, followed by the East of England at 7.5% year-on-year.
Alex von Schirmeister, managing director UK and EMEA at Xero, said: “Small firms are facing a major talent crisis. They are having to offer some of the highest wages in recent memory to compete for staff, which is just piling more pressure on them with other rising costs. That’s troubling in sectors such as manufacturing and construction that are inherently linked to other industries, like retail.
“The government must do more to help in areas like late payments. When big businesses hold on to unapproved debt, it chokes small firms’ cash flow so they can’t compete for workers. We need to incentivise early payments and penalise late payers, and expose the repeat offenders.”