Cash-strapped start-ups are slowing recruitment and ripping out unnecessary costs this year as rising costs batter the bottom line, top investors said today.
Soaring inflation in the UK is squeezing venture-capital backed firms, which most often operate at a loss, causing bosses to slow down hiring and mull shifting some roles to contractors.
“Startups have never been quick to hire and expand but growing costs are creating more of a challenge,” Stephen Page, boss of seed-stage investor SFC Capital told City A.M.
“Hiring is delayed and alternative employment methods are considered, such as outsourcing and subcontracting or working on a freelance basis to get things done.”
The latest inflation print in the UK hit by 9.4 per cent, with predictions that it could hit 13 per cent in October driven by a spike in energy prices which have ramped up costs for firms across the country.
In three months to June, a squeeze on expenses this year caused UK job listings to plunge according to tech startup recruitment platform Otta, with 20 per cent fewer new job listings posted on the site and the amount of live roles falling by 13 per cent.
Seb Wallace, investment director of said hiring was being hit by the squeeze on costs.
“Across the board, we are seeing startups be more purposeful with hiring. Required hires are still being made, but there is less room for mishires in a tight labour market where salaries are increasing,” he told City A.M..
“Startups are therefore thinking carefully about who they bring on board and the value they can offer.”
Wallace said that salaries are and “always have been” the key early-stage cost pressure in UK, with soaring inflation now exacerbating the squeeze.