Much has been leaked ahead of today’s anticipated Autumn Statement, including two warning shots regarding the tax treatment of Personal Service Companies and pensions, but there is no obvious good news on the horizon for SMEs.

Stormy seas ahead?

In fact, you could argue that there are stormy seas ahead.  There are signals that exports are down, with a stronger pound partly to blame. For many this will be good news – cheaper oil means lower transport costs and cheaper imported materials means lower production costs, but with commodity prices down to levels not seen for 5 years or more, there is a real concern that deflation on a global scale isn’t far away.

This is worrying. Consumers might like the idea of prices falling year after year, but remember what this means for small businesses: falling turnover. Running just to stand still. As a consequence, businesses will face huge pressure to cut costs rather than investing for growth.

Passing on falling prices to suppliers is a hard conversation no business wants to have. But not nearly as hard as talking to employees about redundancy. If deflation takes hold, we’ll soon see businesses having to cut one of their biggest bills: staff.  Invariably this means cutting jobs, as firms generally find they have little scope to cut wages across the board.

Furthermore, many small businesses sell to larger businesses, who will use their buying power to minimise their pain from deflation.  Smaller businesses already face elongated payment terms from big businesses, often waiting months to get paid for their goods and services.

This restricts cash flow, reinvestment and growth. With bank overdrafts for smaller businesses down almost 50% in three years, there are increasingly few options available for small businesses looking to buffer growing working capital pressures.

Putting the wind in the sails of small businesses

What should the Chancellor do to improve the financial prospects of smaller businesses? Aside from the obvious levers of lowering taxes or increasing grants and subsidies, there are four ways the government should help firms get access to the finance they need.

1.       Look for opportunities to increase price transparency within the commercial finance industry.

As a consumer, thanks to regulation, we’re used to seeing an APR on finance products. But SME finance is largely unregulated, and promotions need not carry an APR. This allows some providers to hide fees and unanticipated costs in complex terms and conditions.

This means some businesses pay more than they should for finance, while others struggle to compare providers and miss out on the best deal – in both cases this increases costs and limits growth.

2.       Fast track implementation of the referral scheme enshrined in the Small Business, Enterprise and Employment Act of 2015 to ensure that businesses rejected for bank credit are quickly and efficiently referred to alternative providers.

This provision of the new law passed in the spring is sadly still not implemented, and recent commentary suggests that businesses might have to wait until autumn 2016 for this to go live.

3.       Remove any remaining red tape that’s stopping the British Business Bank from deploying capital to SME lenders under its Investment Programme.

This welcome initiative was launched in April 2013 and extended to £400M as announced at the 2014 Autumn Statement, with the aim “to promote volume and diversity of supply of lending to smaller businesses by encouraging new entrants and supporting the growth of smaller lenders in the market.”

However, according to the 2015 annual accounts, over 40% of these much needed funds were still yet to be committed, and less than 10% were actually being lent out.

4.       Act quickly on the proposed remedies put forward by the CMA investigation into the supply of SME banking services.

The CMA process needs to run its statutory course, but many of the remedies put forward (e.g. a price comparison website for SME banking products where banks and alternative providers can go head to head, greater data sharing by banks to help business source credit elsewhere) will clearly increase competition and could be accelerated now.

James Sherwin-Smith is CEO of small business funding platform Growth Street