The first quarter of 2024 has witnessed 1.4% year-on-year (YoY) rise in employment among UK small businesses, the most substantial growth in two years. This is according to the latest data from Xero Small Business Insights (XSBI), which also noted commendable increase in wage growth, reaching 3.3% YoY.

However, this achievement was dampened by the sluggish sales noticed in the same quarter, with only a 0.5% YoY increase. This tepid growth was primarily attributed to a 4% YoY decline in March sales, partly influenced by the early Easter bank holiday.

Scotland and the North of England emerged as frontrunners in bolstering economic growth this quarter, with small businesses in these regions showing a more robust performance than the rest of the UK. 

In terms of sales, Scotland outpaced the rest of the UK with a 5.7% YoY increase over January and February, reflecting sustained growth similar to the previous quarter of 6%. Meanwhile, the North East of England saw sales rise by 4.7% YoY during the same period.

Despite the positive employment trends, small businesses continue to grapple with late payments, exacerbating financial challenges. On average, small firms faced delays of 6.4 days in receiving payments during January and February.

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“An appetite for hiring is a positive sign of growth amongst small businesses, but it doesn’t disguise the slow sales data we’ve seen over the last two quarters. There are some glimmers of stronger performance in Scotland and the North of England, but we need to see recovery across the UK,” said Alex von Schirmeister, managing director, UK & Emerging markets at Xero.

“To accelerate this there are some preventable issues we can address immediately – small businesses must be paid on time. We’re still talking about late payments because our data shows it’s still getting worse. It’s crucial the government holds large firms accountable.”