December closed the year with a clearer economic signal than we’d seen for much of 2025: inflation was drifting toward target and the Bank of England took a pre-Christmas step to ease monetary pressure — cutting Bank Rate by 0.25 percentage points to 3.75% on 18 December. That decision was explicitly linked to falling inflation and gives buyers and sellers a little more clarity on financing costs heading into 2026.

Official measures showed inflation moderating through late 2025 — the CPI stood at around 3.2% in November — a notable downshift from the higher levels earlier in the year and a key reason the Bank felt able to loosen policy. That drop matters directly to dealmaking because lower (and less volatile) inflation reduces uncertainty over margins, borrowing costs and long-term forecasts used in valuations.

Retail and food prices rose slightly as we approached the Christmas period — supermarket price pressure and some trade-down behaviour were reported in late-December — so consumer facing businesses still felt cost and margin squeeze even as headline inflation eased. That’s important if your business earns the bulk of revenue from households over the winter months.

On the M&A front, the mid-market showed its resilience. While overall deal volumes were softer than 2024, buyers remained active and selective — prioritising cash-generative, defensible businesses rather than speculative growth stories. Mid-market advisers and law firms reported steady dealflow and growing appetite among strategic buyers and long-term investors as financing conditions stabilised.

Quick roundup — the real moments of 2025

• Inflation peaked earlier in the year and trended down toward ~3% by late 2025, creating room for policy easing.

• The Bank of England moved to cut rates in December, signalling a gradual pivot toward lower rates in 2026.

• The economy remained low-growth but stable; forecasters revised 2025 growth into the low-1% range (a “two-speed” recovery across sectors).

• Mid-market M&A proved more durable than headline figures suggested — buyers focused on quality, recurring revenue and margin-stable targets.

What this means if you’re thinking of selling (or buying)

• Sellers: a clearer rate path and steady buyer interest for quality assets makes now a realistic time to prepare an exit. Update management accounts, tidy recurring revenue contracts and prepare an orderly data room — these small wins materially improve buyer confidence.

• Buyers: with financing costs likely easing gradually, consider prioritising strategic, cash-generative targets where operational improvements can be realised quickly.

• Both sides: be realistic on timing and valuation — buyers want downside protection; sellers should stress defensible cash flow and customer retention.

As always, if we can help in any way, we’re happy to do so.

email us: info@thebusinessboard.co.uk
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*Sources: BOE, ONS, Reuters, Wedlake Bell, BCC