UK Vacancies Fall as Microbusinesses Advertise Fewer Jobs, ONS Says

Microbusinesses are behind the latest fall in UK job vacancies, according to figures published by the Office for National Statistics (ONS) on 20 October.

The report lands eight days before Chancellor John Healey delivers his Autumn Budget on 28 October, and the ONS’s survey suggests rising staff costs may be holding smaller businesses back from recruiting.

David Freeman, the ONS’s deputy director for labour market statistics, said the decline was “concentrated mainly within smaller businesses, which cite increased labour costs as a key factor”.

Employment Hero’s Employment Index, drawn from payroll records of 4,842 businesses and 169,661 employees, shows the same caution, with employment growth at smaller businesses slowing from 4.9% in March to 2.9% in September.

Microbusinesses Account for the Quarter’s Fall in Vacancies

Total vacancies fell by 21,000 (2.9%) to 691,000 in the three months to September, according to the ONS Vacancy Survey, and on the ONS’s rounded figures, businesses with one to nine employees account for all 21,000 of that fall. Their vacancies dropped 21.1% on the quarter to 77,000, the lowest for businesses of that size since June to August 2013 outside the pandemic, and are down 38,000 (32.8%) on the year. Businesses with 250 to 2,499 employees were the only one of the five size bands to record a rise, adding 2,000 vacancies.

At 691,000, total vacancies are below 700,000 for the first time since February to April 2021, and they fell in 14 of the 18 sectors the ONS reports on, including construction, where they dropped 20.5% on the quarter. Unemployment, by contrast, eased to 4.7% in the three months to August, down 0.1 percentage points on the quarter, though the ONS flags quality issues with the Labour Force Survey behind that figure.

ONS Survey Points to Labour Costs at Smaller Businesses

The bulletin stops short of blaming labour costs for the fall, saying only that “feedback from our Vacancy Survey continues to suggest that smaller firms may not be recruiting because of increases in labour costs”. The pattern goes back at least to the ONS’s July bulletin, when microbusinesses also recorded the largest quarterly decrease, with vacancies down 8,000 (7.1%), alongside the same feedback on labour costs.

What the ONS Margin of Error Means for the Vacancies Figure

Because the Vacancy Survey samples businesses rather than counting every one, each figure is an estimate, and the latest round had a response rate of 76.3%. The ONS puts the margin on the total at roughly 32,000 either side of 691,000, which is larger than the 21,000 quarterly fall, so the survey can’t rule out vacancies having held flat. It doesn’t publish a margin for each size band, so the microbusiness figures, both the 77,000 level and the 21.1% fall, are best read as central estimates rather than precise counts.

UK Wage Growth Cools at Small Businesses Ahead of the Autumn Budget

The ONS describes annual growth in regular earnings, at 3.7% in June to August, as relatively stable, while total earnings growth slipped to 3.7% from 3.9% in the previous three months. Payroll data shows pay at small businesses losing momentum, with the Employment Index recording full-time median wage growth of 0.1% month on month in September and 0.6% over the quarter, the lowest quarterly rise in 25 months.

Kevin Fitzgerald, UK Managing Director of Employment Hero, said the official figures matched the company’s own payroll data: “Today’s figures reflect what we’re seeing on the ground among the UK’s small businesses.”

He added that small businesses are “understandably holding fire” with the Autumn Budget approaching, after a recovery in hiring that has taken time to build: “Small businesses have shown remarkable resilience, but with hiring only now returning to early-2024 levels, the Chancellor needs to recognise that there is a limit to how much uncertainty they can absorb.”