Small business employment grows in second quarter of 2024

Small business employment up by 500 jobs in Q2-2024

At the end of the second quarter of 2024, UK small businesses with 1-9 employees employed 4,284,000 people. This is 500 more than in Q1-2024 (quarterly increase of 0.01%) but 8,100 fewer than in Q2-2023 (annual decrease of 0.19%). 

The annual decline is part of a longer-term trend which began after Q2-2022, when small business employment hit a post-pandemic peak of 4,316,100. Since then, employment levels have been returning to their pre-pandemic trend—offsetting a surge in small business employment during the initial pandemic recovery period.1

Jump to: Sectors | Nations & regions | Analysis by Professor Ufuk Akcigit

Sectors

Mixed picture with 7 sectors creating jobs at small businesses but 6 sectors cutting back

The relatively small quarterly increase in small business employment for the UK as a whole masks much larger changes among individual sectors (see table below). For example, the wholesale and retail sector (SIC G) added 3,500 small business jobs in Q2-2024 (quarterly growth of 0.44%) but the construction (SIC F) and manufacturing (SIC C) sectors each lost 3,700 (quarterly declines of 0.65% and 1.53%, respectively). 

Notably, despite its recent decline in small business employment, the construction sector remains 16.17% above its pre-pandemic trend (see chart above).1 The sector has created 92,200 more jobs since the pandemic than it would have if it had continued on its pre-pandemic growth trend. 

Nations and regions

London’s small business employment growth outpaces rest of the UK                                                                                                                                  

London had the UK’s fastest small business employment growth in Q2-2024 (see table below). Its small businesses now employ 732,500 people: 1,500 more than in Q1-2024 (quarterly growth of 0.20%). Annually, employment is up by 1,400 thanks to stronger growth than other regions of the UK over the past 12 months. If London’s small businesses created jobs at the same rate as peers in the same sectors elsewhere in the the UK, annual growth would be down by 1,300 jobs.2 London is also currently outpacing its own pre-pandemic growth trend, with 26,900 more jobs at small businesses today than if growth had continued at the same rate as before the pandemic (see chart below).

Elsewhere in England, small business employment also increased in Yorkshire & the Humber compared to Q1-2024 but declined in the North East and the North West over the same period. Among the other nations of the UK, quarterly employment was down in Scotland, unchanged in Wales, and up in Northern Ireland (see table below).

Expert analysis

Professor Ufuk Akcigit explores the trends in more detail.

“The UK economy continues to face significant inflationary pressures. Consequently, the Bank of England has maintained its policy rate at historically high levels and has not indicated any imminent rate cuts. Post-COVID macroeconomic conditions in the UK have been particularly challenging, characterised by persistent inflation and high interest rates. This environment has notably impacted small businesses.

“With these challenges, the economy has yet to show a strong recovery—particularly among small businesses. According to the Intuit QuickBooks Small Business Index, in the second quarter of 2024, UK small businesses experienced a mild and long-overdue growth in employment. Unfortunately, this growth was small compared to the previous quarter, at 0.01%, translating to an annual decline of 0.19%.

“UK small businesses have been among the most severely affected globally. This is due to several factors: persistent and rising inflation creating economic uncertainties; ongoing issues in supply chains hindering business operations; staff shortages and increased labour costs putting additional pressure on small businesses; higher prices for goods, services, and particularly energy increasing operational costs; shifts towards online shopping challenging businesses that are slow to adapt; and many businesses taking on additional debt during the pandemic, with rising interest rates increasing the cost of servicing this debt and adding to financial pressures.

“A robust resurgence in the UK economy hinges on the revival of small businesses, which constitute the majority of enterprises and a significant portion of the UK labour market. Addressing the issues facing small businesses is crucial for fostering a broader economic recovery.”

Notes

1. “Pre-pandemic growth trend” refers to a small business employment trend line drawn from January 2015 to the beginning of widespread COVID-19 pandemic counter-measures in March 2020, showing the longer-term trend in small business employment growth before the pandemic. Extending this line from April 2020 to June 2024 and comparing it to current employment levels provides a measure of post-pandemic recovery in small business employment. Above the trend line indicates employment has grown faster since the pandemic than before it. Below the trend line indicates employment has grown slower since the pandemic than before it. See line charts for details.

2. Based on an Analysis of Variance (ANOVA) test of the Intuit QuickBooks Small Business Index’s latest quarterly data to identify if local trends reflect what’s happening nationally by sector or not.

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