What the Intuit QuickBooks Small Business Index tells us about small business job vacancies in Q4-2023

Falling vacancies suggest small businesses pulled back on hiring in 2023

Job vacancies at small businesses declined consistently in the UK in the final quarter of 2023, falling by 5.94% in October, 3.46% in November, and 2.79% in December, according to the latest Intuit QuickBooks Small Business Index estimates released on January 8. The Office for National Statistics reported GDP was down 0.3% in October 2023. 

Over the year, the number of job vacancies at small businesses declined from 163,000 in January to 138,100 in December, with seven months of negative growth, four months of positive growth, and one month of zero growth. The Index suggests 2023 was a turbulent year for many small businesses in the UK.

What does it mean when job vacancies are declining?

Both unemployment and inflation can influence job vacancy trends. The latest available official statistics show rising unemployment in the first half of 2023. If this trend continues, the decline in small business job vacancies is unlikely to be due to open positions being filled by job applicants. Instead, inflation may have contributed by squeezing small business budgets, making it harder for them to hire—as Professor of Economics, Ufuk Ackgit, explains below.

Analysis from Ufuk Akcigit, Arnold C. Harberger Professor of Economics at the University of Chicago

“The Bank of England has consistently increased interest rates since December 2021 to curb inflation, elevating its main policy rate from 0.1% to a 15-year high of 5.25%, with no plans for a reduction until May 2024. This policy shift has significantly impacted economic activity, particularly affecting small businesses, which have substantially reduced their job openings by nearly 30% since April 2022. The most recent quarter witnessed a considerable decline of approximately 17,900 vacancies compared to the previous quarter, reflecting a 12.2% quarterly and 16.5% annual decrease in job openings. When examining these figures in the context of the overall national vacancy numbers, the share of small businesses has dropped from its peak of 20.9% in September 2020 to 15% in November 2023.

“A sectoral breakdown reveals that the annual drop in vacancies occurred across all sectors, except for the arts, entertainment, and recreation sector, which experienced virtually no change in yearly vacancy numbers. On a quarterly basis, some sectors saw an increase in job openings relative to Q3, with the information sector experiencing the largest quarterly growth.

“The sustained significant decline in vacancy numbers may be indicative of weakening small business activity in the UK, reaffirmed by the pronounced reduction in the overall share of vacancies. While addressing higher-than-expected inflation is warranted through strict policy measures, it is essential not to overlook the visible impact on small business activity.”

Mixed end to the year for wholesale and retail sector

In the final quarter of 2023, the Index shows a mixed picture for the wholesale and retail sector (SIC G), which is a significant source of small business jobs. Job vacancies declined in October and December but increased in November (seasonally adjusted). In fact, November was the only month in 2023 the sector saw job vacancy growth, up by 1.37%. The subsequent decline in December was equivalent to 700 fewer job openings at the sector’s small businesses compared to November, equating to a loss twice as large as the previous gains. This up-and-down trend correlates with survey data from the Office for National Statistics, which reports an increase in the volume of retail sales in November after flat performance in October, while the British Chamber of Commerce’s Quarterly Economic Survey reports that 28% of retailers saw a decrease in domestic sales in Q4 of 2023.

There was better news for small businesses in the transport and storage sector (SIC H)—which provides fewer small business jobs than wholesale and retail but is closely related. The sector ended the year with two consecutive months of job vacancy growth at its small businesses: 3.2% in November and 0.28% in December. This reverses the trend seen in the first ten months of the year, when job vacancies consistently declined. The forthcoming February 2024 update to the Index, due on February 8, will tell us if this positive trend has been sustained through January. The Index is seasonally adjusted.

A slow peak season for accommodation and food services

Like wholesale and retail, the final quarter of the year can be an important time for many in the accommodation and food services sector (SIC I). But here, job vacancy growth rates were down by 1.31% in October, by 2.09% in November, and by 0.82% in December. December’s decrease translates to 100 fewer jobs openings at small businesses nationally in the sector compared to the month before. 

As above, this data is seasonally adjusted, which means normal seasonal fluctuations are removed—indicating that the final quarter of 2023 was tougher than the final quarter of 2022 for bars, hotels, and restaurants with less than 10 employees. Correspondingly, the British Chamber of Commerce’s Quarterly Economic Survey ‌data found that 32% of firms in the hospitality sector reported a decrease in investment in Q4. Looking back over 2023‌, the Intuit QuickBooks Small Business Index shows declining small business job vacancies in the sector in each month of the year.

England sees largest decline in small business job vacancies in final quarter of 2023

Of the four UK nations, England saw the largest decline in small business job vacancies in Q4-2023, down by 1.07% in October, 1.27% in November, and 2.93% in December. December’s decrease was equivalent to 3,700 fewer job vacancies at England’s small businesses compared to November, leaving them with 122,400 open positions. Looking back over the year‌ as a whole, however, the rate of decline has slowed, with faster declines in the first six months than the second. Future Index updates will tell us if this is the beginning of a turnaround or not.

Wales ended the year with its largest monthly decrease in 2023 in December, at 9.65%, with 500 fewer small business job vacancies compared to November, ending the year with 4,500 open positions. Earlier in the quarter, the picture was more positive, with a below-average decline in October (at -0.34% in Wales vs -1.12% for the UK as a whole) and above-average growth in November (at 2.89% in Wales vs -1.43% for the UK as a whole).

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