January opened 2026 with a welcome but measured easing of the cost-of-living squeeze: annual CPI inflation in the United Kingdom slowed to 3.0%, down from 3.4% in December. That drop — driven by weaker transport and food pressures — immediately pushed markets to price in a high chance of a spring cut to the base rate.

The Bank of England elected to hold Bank Rate at 3.75% in its most recent decision, while explicitly noting that if inflation continues to track toward target there is scope for “some further cuts” later in the year. That combination — falling inflation but a cautious central bank — is exactly the mid-cycle backdrop that tends to support selective deal activity rather than a full-blown bidding boom.

Activity data underlined the same steady, subdued picture. GDP growth was muted at the end of 2025 (estimated +0.1% in Q4), reflecting a stretched recovery where manufacturing showed signs of life but services and investment remained weak. For acquirers and sellers in the  £1m–£10m business range, that means headline demand is steady but discerning: buyers are favouring predictable cash flows and margin resilience.

What we saw in January across mid-market deal advisers was a continuation of 2025’s theme: fewer, higher-quality transactions. Reports from lower-midmarket specialists and corporate advisers indicate buyer appetite for cash-generative businesses with recurring revenues — and renewed interest from strategic buyers and well-capitalised financial sponsors as funding conditions look set to ease later in Q2.

Practical takeaways for owners thinking about a sale (or an acquisition) this year

• Sellers: tidy up recurring contracts, update management accounts and sharpen your story on margin resilience. Buyers are trading off headline growth for reliability.

• Buyers: prioritise targets where small operational improvements unlock immediate value — stabilised costs plus predictable customer retention are gold in this market.

• Both sides: expect negotiations to focus on downside protection (earn-outs, warranties) rather than headline multiples.

Finally — a quick political note: Chancellor Rachel Reeves welcomed the easing in inflation as breathing space for the economy, but reminded firms that structural investment will be needed to lift longer-term growth. That political backdrop will shape tax and incentive conversations for deals through 2026.

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

email us: info@thebusinessboard.co.uk
call us: 0118 338 1818

*Sources: BOE, ONS, FT