Retail takes biggest hit as Britain's employment squeeze deepens

145,000 jobs disappear from company payrolls

Britain's companies are quietly shedding employees. The latest ONS figures show 26,000 fewer people on company payrolls in August and 145,000 fewer than a year ago, while unemployment remains at 4.9% and wage growth is slowing. Retail has suffered the biggest payroll fall, raising an uncomfortable question for small businesses: how many jobs can they continue protecting while their own costs keep rising?

The August figures are provisional, but this isn't simply about one month. The ONS says payrolled employee numbers have continued to edge down, with falls particularly evident in retail and hospitality over the past year. Wholesale and retail alone lost 76,000 payrolled employees.

SHRINKING TO SURVIVE

Job losses don't always arrive as mass redundancies. For a small business, it can mean leaving a vacancy unfilled, not replacing somebody who leaves or abandoning plans to take on another employee.

The problem is that retail and hospitality depend heavily on people. Shops need staff, restaurants need people to cook and serve food and hotels need people to look after guests, so eventually there's nothing left to trim without reducing the service itself.

Annual total pay growth has also slowed to 3.9% in the three months to July. Meanwhile, small firms are still dealing with employer National Insurance, higher statutory wages, pensions, energy, insurance, rent and business rates.

OWNERS ARE FEELING IT TOO

The squeeze doesn't stop with employees. Enterprise Nation's latest Small Business Barometer found three quarters of small-business owners now pay themselves less than £20,000 a year, compared with 63% a year earlier.

That should worry policymakers. We're asking whether businesses can afford to employ people when many of the people owning those businesses are struggling to pay themselves properly.

The British Chambers of Commerce calculates that domestic policy-driven costs for a typical SME have increased by more than 70% since 2016. Its latest survey also found only 17% of firms planning to increase investment, the lowest proportion since the pandemic.

THE JOBS WE NEVER CREATE

Every pound swallowed by another business cost is unavailable somewhere else. That might mean delaying new equipment, shelving an expansion or deciding another employee has simply become too expensive.

That's particularly worrying for young people because retail and hospitality traditionally provide many first jobs. If businesses stop recruiting at the bottom of the employment ladder, young people lose the experience needed to climb it.

The BCC is calling for employer National Insurance to be cut for under-25s to reduce the cost of employing younger workers. Whatever solution the Government chooses, it cannot worry about youth unemployment while ignoring the cost to businesses of creating those jobs.

THE BUDGET TEST

The next Budget arrives with payroll employment falling, investment intentions weak and business costs high. Another tax, employment cost or compliance burden could make already cautious employers even more reluctant to recruit.

Small businesses need an environment in which employing another person makes commercial sense. Otherwise businesses will continue learning how to operate with fewer people, while investment and expansion plans remain on hold.

Britain relies on small businesses to create jobs and give young people their first opportunity. Once those businesses decide they can no longer afford to employ, the damage extends far beyond their own balance sheets.

The warning light is flashing. The Budget needs to make employing people easier, because once businesses learn to survive with fewer staff, some of those jobs may never come back.

This is an article by Liz Barclay - copyright https://business111.com/news