Why SMEs are holding back on hiring, and how to grow anyway

Only 15% of UK businesses are hiring confidently, down from 24% a year ago, according to the CBI and Pertemps Employment Trends Survey 2026.

The British Chambers of Commerce's latest survey of more than 4,300 businesses, 92% of them SMEs, found only 23% plan to grow their workforce in the next three months.

Why SMEs are hesitant

Employer National Insurance contributions have gone up, and the national living wage is projected to rise to £13.18 an hour in April 2027. Patrick Milnes, Head of People and Work Policy at the BCC, put it plainly: "Soaring employment costs are holding back hiring, training and growth."

New employment law adds to the worry. 72% of firms in the CBI survey named employment regulation as a major concern, and four in five warned that the government's Make Work Pay reforms are unaffordable without harming growth, jobs or investment. Make UK adds that further Employment Rights Act 2025 measures, due in October 2026, were adding uncertainty. For many directors, the financial risk of taking someone on now feels greater than ever.

What it means for engineering and manufacturing firms

Make UK's Q3 2026 Manufacturing Outlook, produced with S&W, found investment intentions rising while the recruitment balance fell to +3%, down from +15% in Q2. Make UK's senior economist Fhaheen Khan said high employment, energy and regulatory costs "are forcing firms to think twice".

That data was shared at a recent NAAME manufacturing round table in Norfolk, where many directors said they are now exploring automation and AI to take the headache out of hiring. Other European countries show how far that can go. The International Federation of Robotics puts Germany at 449 robots per 10,000 manufacturing employees. A Make UK report last year put the UK at just 112, 24th in the world and around half the EU average.

Automation can take on repetitive production work. It does not win new customers. A salesperson is still one of the hardest hires to justify, with costs landing months before the first order. So many firms wait, and new business slows because no one has time to chase it.

The fractional alternative

A fractional team will not replace your welder, machinist or design engineer. But the commercial roles are different. Sales, marketing and business development can be bought in by the day, with the people on someone else's payroll.

That takes the stress out of hiring. No recruiter fees or months-long hiring process. No training costs. No pension contributions, employer National Insurance, sick pay or holiday cover. No HR admin, appraisals or notice periods.

If orders grow, you add days. If the market softens, you scale back. The cost follows the opportunity.

Where Hayward Miller helps

Hayward Miller is a fractional sales team for the engineering and industrial sectors. We work as your outsourced team or alongside your own. Telemarketing, digital marketing, business development and market research all sit under one fixed monthly fee, based on 10, 20 or 30 days of outreach per month, with no long-term lock-in and one full calendar month's notice.

Holding back on hiring is a sensible response to rising costs. Holding back on sales is not.

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