Interest Rates, Inflation & the Budget: Why It All Matters for Business Borrowing
Interest rates and inflation aren’t just topics for economists - they’re daily realities for every UK business managing debt, cashflow and investment plans. As the Budget approaches, their direction has never been more crucial.
The Bank of England has spent the last two years battling inflation, keeping rates higher than many expected. While inflation has started to cool, the outlook is still uncertain — and what happens in the Budget could determine whether rates fall, hold, or rise again.
Why the Budget Matters for Borrowers
Fiscal policy - how much the government spends and taxes - directly affects inflation expectations. If the Budget is seen as expansionary (think tax cuts or spending boosts), markets may anticipate higher inflation, keeping borrowing costs stubbornly high.
Conversely, a fiscally cautious Budget could give the Bank of England more confidence to start lowering rates sooner - potentially easing credit conditions for businesses.
This balancing act between fiscal policy and monetary policy is why the Budget has such an immediate impact on lending sentiment. For businesses planning to refinance, acquire, or invest, the next few weeks could define borrowing costs for the rest of the year.
What Businesses Should Be Doing Now
Review Existing Borrowing
If you have facilities due for renewal within the next 6–12 months, explore refinancing options now. Waiting could expose you to market volatility after the Budget.Consider Fixed vs. Variable Rates
While some borrowers are leaning into short-term flexibility, others are locking in certainty while rates remain relatively high but stable. The right move depends on your cashflow predictability and growth trajectory.Model Multiple Scenarios
Build forecasts based on different rate paths. Ask: what happens to your profitability if borrowing costs rise by another half point - or fall by one? A well-prepared borrower makes faster, more confident decisions when the market shifts.Revisit Lending Relationships
Not all lenders respond to policy changes the same way. Some private lenders move quickly to capture new opportunities, while traditional banks often take longer to adjust. Diversifying relationships gives you flexibility.
Our View
At Otium Partners, we help businesses turn uncertainty into opportunity. Our team tracks fiscal and monetary trends daily, using that insight to match clients with lenders who share their vision - not just their balance sheet.
The Budget may send markets up or down, but one constant remains: preparation pays.
If you’d like to discuss how potential interest-rate shifts could affect your business borrowing, contact us at pa@otiumpartners.com. We’ll help you model the impact and find the right funding strategy for the months ahead.