We’re Creating Businesses, Not Jobs – And Paying the Price on the High Street

Britain is starting businesses at a healthy clip, but it’s not creating jobs to match. New firms are launching at the fastest rate in two years, yet unemployment is climbing and staff numbers are shrinking. The reason is uncomfortable but clear: for many entrepreneurs, hiring people has become too risky and too expensive. Instead of taking on employees, businesses are turning to technology, freelancers and automation just to survive. The result is a growing economy on paper, but a hollowing-out jobs market on the ground.

Job creation down and job cuts up Entrepreneurship is on the rise with new small businesses launching at the fastest rate for 2 years according to Bloomberg analysis of the official labour market data. More businesses should mean more jobs surely, so why are the unemployment figures climbing? While we’re increasingly embracing entrepreneurship, we’re turning to technology including AI instead of taking on costly employees:

New UK firms are generating an average of 2.7 jobs each, one less than in 2017, as they increasingly use artificial intelligence and freelancers instead of permanent staff. Total employment created by new enterprises fell 16% to the lowest level on record. • Entrepreneurs say the government has made it more risky and expensive to hire permanent staff, with higher costs and wages and new employment laws.

New startups are using tech and contractors or freelancers instead of hiring, to reduce the number of people on their permanent payroll. A micro business owner told Business111 this week that it cost him £110,000 to bring on 3 new starters, in hiring, onboarding and training costs, before they could do anything productive for the firm.

The accountants’ body ACCA estimates those starter costs for one person, to be £65,000 on average before they contribute anything to a firm’s productivity. As another micro business owner told me: the costs are scary and then you have increased wages and National Insurance Contributions on top.

In another cruel blow to micro and small businesses, retailers are planning to cut staff hours and jobs according to the British Retail Consortium (BRC). The finger is pointing at rising employment costs, and the employee rights coming down the track. Add in a serious dollop of pessimism about the economy and you have the ingredients for a perfect economic mess.

I fail to understand why any of this is coming as a surprise to anyone. Costs are going up. If you can’t absorb those rising costs you have to increase your prices to a buying public that can’t afford them. Those customers look elsewhere for cheaper goods and there’s no end of cheaper competition online. Even the online sellers are beginning to eat each other in the race to the bottom. Again, technology is having an impact and once you’ve invested in that tech there’s no wages or National Insurance contributions to pay.

Young people in particular are affected when the retail sector is struggling. The BRC says the retail sector has lost 74,000 jobs in the past year. A lot of those are from big firms and back office and head office jobs have gone. But you only have to look along your high street to see the gaps where once flourishing small shops attracted willing customers and had ‘sales assistant wanted’ signs in the windows. There are more cuts to come too as more tech options reduce the need for people and given the BRC says the employment costs rose by £5bn last year.

The Government wants revived and vibrant high streets. High streets need restaurants, pubs and shops to attract people in. Local authorities are all looking for great ideas to mix up the spaces with entertainment and leisure options too, but without the sectors hardest hit by rising costs of doing business, the hospitality and retail sectors, the outcomes of those efforts are far from certain.

Employers want to treat people fairly and be an employer of choice, but if the costs of implementing policy, hiring, training and paying, on top of the bills, are unmanageable for businesses, particularly our crucial micro and small businesses, this leaching of jobs, increase in the numbers of young people looking for work, and the hollowing out of our high streets will continue.

If unemployment carries on growing beyond the 5.2% we saw this week there will be more people dependent on the welfare system and the tax revenue coming into the Treasury for use on Government projects and public services will fall.

Where is the growth and the jobs going to come from if not our entrepreneurs and small and micro businesses.

We used to be a nation of shopkeepers. Are we destined to be a nation of

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