Small businesses in manufacturing and telecommunications experienced the healthiest sales growth of all sectors in June 2021, according to the latest data for the UK from Xero’s Small Business Index.
The Index, produced by global small business platform Xero in partnership with Accenture, is based on analysis of anonymised and aggregated data of hundreds of thousands of small businesses. This month, it found that while sales across all sectors grew 6.5% year-on-year (y/y), small businesses in manufacturing experienced sales growth of 11.2% y/y, the highest growth of all sectors in June.
Typically, the Index compares year-on-year data to reveal how the small business economy is faring. However, as the data from June 2020 was significantly impacted by the pandemic, all comparisons in this release have been made using annualised two-year growth to account for base effects.
Sales growth was also seen in telecommunications (10.8% y/y) and retail trade (9.2% y/y), but the data suggested that manufacturing experienced a notably robust period of sales growth as firms continue to recover from the pandemic. Despite this positive overall growth, the pace remains below pre-crisis average of around 9% y/y.
The boost to the manufacturing sector comes as businesses have faced challenges relating to supply chain price changes and raw material availability, and are faced with pressures relating to inflation and managing volatile demand.
This sales growth has also been achieved despite overall jobs among small businesses falling 2.4% in the year to June.
Looking at the small business industry more broadly - the Index remained broadly stable in June, down just one point to 88 points, reflecting that overall conditions in small businesses were steady but still challenging.
Glen Foster - Director, Small Business and Accounting Partners at Xero said: “Recovery is underway and it’s great to see some steady signs of improvement across the small business sector. The tentative growth in manufacturing sales is particularly impressive considering the challenges the sector continues to face with other external factors at play like Brexit. But there is still a long way to go for this sector and the rest of the small business community to get back to pre-crisis levels.”
“As the majority of restrictions are lifted this month, we hope to see the data continue to move in this direction. It’s essential we all work together to create an environment which accelerates this growth in the coming months,” Foster added.
Freddie Lawson, COO at Cornelia James, says: “During the pandemic we were forced to adapt to supply chain challenges and the pressures of ever-changing demands, which was especially difficult given the circumstances surrounding Brexit and related problems with material import and export. That's why it’s really great to see the wider industry starting to recover and we’re also seeing positive results in terms of sales at Cornelia James. We’re looking forward to experiencing even more growth as things continue to open up again.”
Xero has identified the key areas small firms will need greater support to rebuild. The Road to Small Business Recovery includes recommendations on technology access and the creation of a growth economy to help small firms in their recovery.