Liverpool Chamber has warned that rising hiring costs are hammering SME recruitment, with the average small business now paying more than 70% more to employ staff than it did a decade ago. That matters to any small employer weighing up whether to fill a vacancy this autumn, because the warning comes with a forecast that unemployment will keep climbing as firms hold back.
Liverpool Chamber has shared a reaction from the British Chambers of Commerce to the latest ONS labour market figures, warning that rising hiring costs are hammering SME recruitment even as headline unemployment held at 4.9%. The BCC’s cost stack calculator, published alongside the reaction on 21 August 2026, puts the increase in costs for the average SME at more than 70% over the last ten years, driven by successive governments’ policies on tax, wages and employment regulation.
Patrick Milnes, Head of Policy for People and Work at the BCC, said business confidence is at a “post-Pandemic low” and that the squeeze on firms’ finances “shows no signs of easing.” He pointed to last week’s warning that changes to zero-hours contracts could cost businesses almost £3bn, a figure covered in Smart SME’s report on the chaotic jobs reform and its £3bn cost to firms, as a factor already causing employers to reassess recruitment plans.
The BCC’s own forecast expects unemployment to reach 5.2% by Christmas, with youth unemployment climbing to 17%, a trend explored further in our review of the Small Business Plan one year on as businesses continue to face pressure from high labour costs. The ONS data cited by the Chamber points to a downturn in hiring among SMEs specifically as the main driver behind falling vacancies nationally, a trend Smart SME has already tracked in its look at UK firms settling into low-hire, low-fire mode.
Milnes called for “much more” to be done to bolster business confidence and unlock hiring by tackling cost pressures on firms. Firms exploring funding options to ease that pressure can see how the British Business Bank’s expanded vehicle and asset funding facility works., specifically naming a holiday on employer national insurance contributions for under-25s as a measure the government should consider. That would sit alongside wider apprenticeship and education reforms already being discussed regionally, though Milnes was clear that policy on training counts for little if firms cannot afford to take people on in the first place.
What this means for small employers
If you run a small business, this warning is really about timing rather than principle. Hiring costs have not spiked overnight, they have crept up over a decade through employer NI, wage floors and now the zero-hours changes, and that steady climb is exactly what makes it easy to miss until a recruitment decision forces the arithmetic. Firms already tracking the wider cost picture in Smart SME’s review of the Small Business Plan one year on will recognise the pattern: policy announced with good intentions, absorbed by SMEs with the least room to absorb it.
For firms in retail and hospitality, where margins are already thin, the same cost pressures are compounding issues already covered in Smart SME’s piece on business rates reform and the high street. If hiring is on your list this quarter, model the full cost of a new hire, including NI, pension and any zero-hours exposure, before the vacancy goes live, and keep an eye on whether any NI relief for under-25s materialises before you commit.
