UK needs 410,000 SME jobs to return to pre-COVID levels

Britain needs to create 410,000 jobs in the small businesses (SMEs) sector by the end of the year to return to the pre-COVID employment trajectory, according to a new study.

Figures from a Xero study, indicate UK SME job losses have been almost double those seen from big businesses during the pandemic.

According to the report released on Wednesday, in partnership with Accenture, the SME industry employs over half of Britain's workforce.

Xero found that women, workers aged 30 and under, and those in customer-centric jobs such as hospitality experienced particularly sharp falls in employment in the SME sector during the early months of the crisis.

The business platform expects growth to continue to lag throughout the year.

According to the figures from the Job Ahead study, digitally connected small businesses faced far fewer declines in jobs, down 14.8% compared to those with less connectivity, down 18.4%.

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It also showed an industry-wide correlation between small firms that paid higher wages and those with fewer job losses.

In May 2020, higher paying companies reported small business jobs declined 13.5%, compared with lower paying companies with jobs, which dropped 22.3%.

Gary Turner, managing director at Xero UK, said: "We can see first-hand what’s happening to small businesses and the impact on the whole economy and jobs. One thing we’ve noticed is that small businesses are so often overlooked by the government. And this imbalance needs to be addressed. Only then will we see positive change."

Read more: COVID pandemic triggers UK's biggest employment drop for over 50s since 1980s

The report follows official data from the Office for National Statistics (ONS) showed over half of people who dropped off the UK payroll in the last year were under 25. While 80% were under the age of 35.

ONS's number show young people are bearing the brunt of the coronavirus jobs crisis.

According to the ONS figures released in April, 813,000 jobs disappeared from the UK payroll since March 2020. 436,000 (53.7%) of the roles were done by people under the age of 25.

The number of under-25s on the payroll hit just 3.4m, which youth charity Impetus said was a record low.

A separate report by the Resolution Foundation and Nuffield Foundation, showed the coronavirus pandemic has led to the biggest annual employment drop for employees over the age of 50 since the 1980s.

According to the study, published last week, the pandemic has created a "U-shaped" employment shock, which impacted older and younger workers more than those in the middle of the age distribution.

While the 16-24-year-olds saw the biggest dip in work in the past year — 3.9 percentage points — the fall in employment among those between 50-to-69 has been twice as large as those aged 25-to-49 (1.4 compared to 0.7 percentage points).

Watch: UK unemployment rate falls to 4.9%