Wages Up, Headcount Up, But...

The Sage SME Monthly Workforce Pulse (June 2026) is out.

While it may not be the publication most anticipated in the business calendar the Sage SME Pulse is a regular view of the health and behaviour of British small businesses and enterprises and their employees, based on real anonymised data from more than 350,000 businesses in the Sage accounting and payroll products.

Sage figures shows pay rising but inflation, weak GDP, falling vacancies and squeezed incomes threaten a summer slowdown

Britain’s small businesses are holding the line but the latest Sage SME Monthly Workforce Pulse shows the pressure building fast.

Median gross earnings jumped 4.1% year‑on‑year to £2,209, and headcount edged up 0.5% in June, proof that small firms are still fighting to keep staff and stay competitive. However, you can feel there are several ‘buts’ coming.

PAY UP 4.1% BUT WORKERS STILL FEEL POORER

Wages are rising but not fast enough. Inflation has flared again thanks to a global energy price spike, hammering household budgets and wiping out real pay gains. Workers are earning more on paper, but less in reality, and that means weaker spending, fewer nights out, fewer purchases, and less cash flowing into small businesses.

HEADCOUNT UP BUT HIRING IS STALLING

Small business headcount rose 0.5% year‑on‑year, a slight improvement on May, but firms say they’re too squeezed to hire properly:

• Unemployment is elevated, weakening workers’ bargaining power

• Input costs are still high

• Economic uncertainty is rising

• Profit margins are being crushed

And the clearest sign of trouble?

Job vacancies have fallen to a five‑year low in the three months to May which is a clear sign of trouble.  

GDP OUTLOOK: “MUTED” FOR THE REST OF 2026

Despite a decent start to the year, the UK’s growth prospects look grim.

Sage warns that renewed inflation, driven by global energy shocks, is set to weigh on household spending and squeeze small business profits for the rest of 2026. That means slower growth, tighter margins, and tougher trading conditions.

HIRING FREEZE LOOMS AS CONFIDENCE FALLS

Small firms are already pulling back:

• Wage growth is slowing

• Costs are rising

• Confidence is weakening

• Vacancies are collapsing

Businesses say they simply cannot expand headcount when they don’t know what the next quarter will bring.

WORKERS HIT HARD

Higher inflation + slower wage growth = shrinking pay packets.

Real incomes are under pressure, and consumer confidence is subdued resulting in a double blow for small businesses relying on everyday spending. Sage warns this will drag down revenue growth for SMEs through the rest of the year.

BOTTOM LINE

The June Sage Workforce Pulse paints a clear picture:

• Pay up 4.1%

• Headcount up 0.5%

• Vacancies at a five‑year low

• Inflation rising again

• Real incomes falling

• GDP outlook weakening

Small businesses are still standing but the ground beneath them is like quicksand.

Unless inflation eases, interest rates start to come down and we have a new Government that really understands the needs and importance of small and micro businesses and we have some political stability leading to a return of confidence, 2026 could turn from a “resilient start” into a very tough finish for small firms and the economy.