Inflation accelerated to 3.5% in the year to September, up from 3.1%, according to the Office for National Statistics, while government borrowing climbed to its highest level in a year, as reported by BBC Business. The figures land a week before the Budget, at a moment when the Chancellor's room for manoeuvre is narrowing and businesses are watching closely for signals on tax, spending and borrowing. For an SME owner or a portfolio company operator, this is not an abstract macroeconomic story. It is a direct input into the numbers that sit behind every valuation: the discount rate, the cost of debt, and the assumptions a buyer or lender will make about your margins over the next few years.
What this means
Rising inflation alongside higher government borrowing tends to push gilt yields up, and gilt yields anchor the risk-free rate that sits inside every discounted cash flow model. When that anchor moves, the valuation of a business moves with it, even if nothing about the business itself has changed. Our position is straightforward: a valuation prepared six months ago, using assumptions that predate this data, is already out of date. Founders raising capital, owners preparing for an exit, and PE operators marking portfolio companies for their investors all need to revisit the inputs, not simply the headline multiple. The temptation ahead of a Budget is to wait for clarity before committing to a number. We think that is the wrong instinct. Uncertainty does not pause transactions; it only makes the valuation work harder to defend, which is exactly where a rigorous, evidenced approach earns its keep.
The wider picture
Budgets that follow a run of weaker borrowing and inflation data tend to bring speculation about tax changes touching capital gains, dividends, business reliefs and employer costs, and that speculation alone moves behaviour before a single policy is announced. Owners accelerate sale processes to get ahead of a feared change in treatment. Buyers pause to see what the rules will actually say. Lenders reprice risk before the detail of any new policy is confirmed. None of this requires the Budget itself to contain bad news; the anticipation does the work on its own. For SME and lower-mid-market deals particularly, this creates a narrow window where sentiment, rather than fundamentals, drives price. That is a difficult environment to negotiate in without an independent view of value, because every party at the table has an incentive to read the macro news in whichever direction suits their position.
How we think about it
We build independent valuations for transactions, disputes and financial reporting that are designed to hold up when someone on the other side of the table, or a tribunal, has every reason to pick them apart. That means grounding the discount rate in current market data rather than carrying forward a figure from the last engagement, stress-testing cash flow assumptions against more than one macroeconomic scenario, and being explicit about which judgements are evidence-based and which are matters of professional opinion. We do not produce a number and build a narrative to fit it; we produce the working, so the client and any counterparty can see exactly how the figure was reached. When the risk-free rate and the cost of borrowing are both moving, that discipline is not an optional extra. It is the difference between a valuation that survives scrutiny and one that gets challenged in the first meeting.
Where we can help
If you are a founder preparing for a raise or an exit, a PE operator marking a portfolio company, or an owner facing a shareholder dispute, this is the moment to check that your valuation assumptions reflect where rates and inflation actually sit today, not where they sat at the last review. We work alongside your existing advisers, not instead of them, to produce a valuation that is independent, documented and ready to withstand questions from investors, lenders, co-shareholders or the other side in a dispute. Getting the number broadly right is not enough when borrowing costs are this unsettled. It has to be defensible.
The Budget will sharpen these questions rather than settle them, and waiting for certainty is rarely a sound strategy for a business that needs to raise capital, sell, or resolve a dispute on a reasonable timeline. If you want a valuation you can stand behind, Book a consultation.
