Autumn statement looms large for SME finance

The small business sector is eagerly awaiting the details of Rachel Reeves’ Autumn Budget statement on November 26th, with a list of demands to help to ease the multiple-hit she delivered last time around.

Speculation is mounting that the Chancellor will include some targeted protection for small businesses in the forthcoming Budget statement, possibly targeting business rates and the employment allowance, the tax break that was upgraded last time around shielding the smallest companies from the rise in national insurance contributions (NICs).

Yet small businesses were still affected by last year’s budget, according to a survey of 1,000 SME lenders and decision makers commissioned by Paragon Bank. This included the rise in employer NICs (noted by 73% of respondents), the corporation tax rise (69%), national minimum wage hike (64%), and capital gains increase (59%) all taking effect from April 2025.

The same survey indicates that 42% of respondents would invariably like the government to prioritise tax and costs in this year’s Budget. Other important issues that SMEs would like the Chancellor to address are business tax reform (36%), business rates (35%), innovation and investment incentives (30%), skills and training (27%), and access to finance (26%).

These results are echoed in a similar survey undertaken recently by Simply Asset Finance, with SMEs calling on the government to “unlock productivity” by targeting these issues, as well as providing more government-backed loans. Mike Randall, CEO of Simply, said the Government faces “a critical window” in the lead-up to the Budget, and that “the right decisions could unlock growth and fuel productivity… the wrong ones risk stalling momentum.”

Surprisingly, many SMEs seem optimistic about their own growth prospects, although as Derek Ryan, UK managing director of Bibby Financial Services points out, higher costs and economic uncertainty continue to weigh heavily, with a sizeable share delaying their investment decisions until after the budget.

This may explain why the latest Small Business Index compiled by the Federation of Small Businesses (FSB), has declined in recent quarters - lately to -58 points in Q3 2025 from an already depressed -44 in Q2, prompting the FSB to urge the Chancellor to “heed this stark warning and take dramatic action.”

SMEs are very resilient of course, which is probably due to the fact they have been facing a challenging environment for the past 10-15 years. As John Phillipou, managing director of SME lending at Paragon Bank explains, this has been due to multiple events, including austerity, the Scottish Union and EU referendums, Covid, and the subsequent inflationary crisis and its legacy.

Ed Rimmer, CEO of Time Finance, endorses this: “We see many of our SME clients adapt, evolve and diversify amidst change and challenge,” he says. This includes cost pressures, as well as the complexities surrounding employment legislation, including evolving rules on workplace flexibility, holiday pay, and IR35 compliance, to ongoing reforms concerning the minimum wage, pension auto-enrolment, and employee rights. All of this demands significant time and resources that are often at a premium when running a small business.

He goes on to say that Time Finance recently supported a long-established furniture manufacturer that had lost 50% of its revenue following the withdrawal of a major customer and was only weeks away from insolvency.

“Our team structured a £1.6 million asset-based lending solution, incorporating both an invoice finance facility and a property loan. This funding enabled the client to establish a new company, restructure its debt, reacquire its assets, and access working capital from day one.

“The entire process was completed within two weeks, demonstrating not only the intense pressures currently facing many SMEs but also the transformative impact that well-structured business finance can deliver.”

The government can ultimately do more to help. Ryan of Bibby FS says that 37% of firms they have surveyed want the government to cut business rates, and a quarter want to see the employer NIC rise reversed. It has notably increased employment costs when margins are already squeezed.

He says SMEs are also looking for clearer measures to support international trade, with new trade agreements to help create opportunities abroad. Targeted help to offset international tariffs, particularly on exports to the US is also required.

There is acknowledgement that “lenders have a crucial role to play, offering flexible, accessible funding that supports investment and growth, and government must help too, by ensuring a fair, competitive lending environment that keeps finance flowing.”

Paragon’s Phillipou says SMEs simply want clarity from Reeves. They know difficult decisions must be made to balance the books, but they abhor uncertainty, and the pre-budget announcements have not helped. SMEs do not really expect the NIC rises or higher minimum wage to be rolled back by the Chancellor. They would just like to see no further employment cost hikes.

Similarly, Rimmer considers it unlikely that the government will reverse the tax increases, but he says there are in any case other meaningful ways to support SMEs.

“One of the most persistent challenges continues to be late payment of invoices, a burden that severely constrains cashflow and growth. Many of our clients experience delays as a matter of routine, with payments rarely made on time.

“While there have been several government attempts to address the issue, such as strengthening the Prompt Payment Code, introducing reporting requirements for large companies and the appointment of a Small Business Commissioner to handle complaints, progress has been slow and the day-to-day impact has been limited.

Invoice finance facilities provide an immediate solution, he says, giving businesses access to the working capital they both need and deserve.

Phillipou adds that government can support lending through Budget clarity, as well as a clear and compelling narrative as to how it will create growth and investment, and by backing the work that the British Business Bank undertakes.

He goes on to say that SMEs are encouraged by the government’s plans to free-up businesses from the burden of bureaucracy. The Chancellor promised £6 billion in red tape cuts at the inaugural Regional Investment Summit (held in Birmingham, in October).

“But now we need actions and not words,” he states.

Back that up with a more business friendly budget and SMEs will have greater confidence to grow and invest. But the question is whether Rachel Reeves is truly listening and will use this opportunity to act.

"Autumn statement looms large for SME finance" was originally created and published by Leasing Life, a GlobalData owned brand.

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