London, 10 June 2025: London’s small and medium-sized businesses (SMEs) are struggling to keep pace with the rest of the UK’s employment recovery, with the capital recording the weakest job growth in May, a new report from HR, payroll and employment platform Employment Hero shows.

Employment Hero’s Jobs Report uses real-time data from 105,000 employees across small and medium-sized businesses with 1-500 employees in the UK.

Data from the end of May showed that London’s employment grew by just 0.7% over the month. This lags behind May’s national average growth of 1.2% and falls significantly short compared to other major regions. The North of England led the recovery with an exceptional 3.5% increase, while Wales recorded its first growth in May (2.8%) after a prolonged year-on-year slump. Meanwhile, the South of England (excluding London) achieved a growth rate of 2.2%.

The weakness in London’s SME employment growth comes amid a broader decline in job opportunities across the UK. The ONS June labour market report shows vacancies fell by 63,000 (7.9%) to 736,000 in the three months to May – the 35th consecutive quarterly decline. With 2.2 unemployed people now competing for each vacancy compared to 1.9 last quarter, London’s cautious hiring approach among small and medium-sized businesses reflects wider labour market pressures facing employers of all sizes.

London’s wage growth lags behind

The capital’s struggles also extend to wage growth, where London has recorded the slowest progress across all regions.

London’s wage growth over the past three months stands at just 0.2% – the weakest performance nationally, and well below other major regions that have seen more robust salary increases.

The findings suggest that while other parts of the UK are competing more aggressively for talent and driving up wages, London’s SME sector remains more cautious about both hiring and pay increases.

Regional rebalancing emerges

The data points to a potential economic rebalancing away from London’s traditional dominance, with regions that have historically lagged behind now showing renewed strength.

The North’s remarkable turnaround is particularly striking, as this region was the only one to experience negative year-on-year employment growth, yet has now posted the strongest monthly recovery.

Kevin Fitzgerald, UK MD of Employment Hero commented:

“It’s encouraging to see some real green shoots of recovery across the UK, especially outside of London. After a tough period, it’s great to see regions like the North of England and Wales showing  job growth.”

London’s slower pace this month stands out and could suggest a shift towards a more balanced national economy, where opportunity isn’t just concentrated in the capital. Movements like remote and flexible work have helped unlock talent and potential right across the country – and we’re seeing that reflected in these numbers.

At Employment Hero, we believe this kind of regional resurgence isn’t just good news – it’s essential. It gives more people a fair shot and lays the foundation for a more inclusive, resilient future of work,” said Fitzgerald.