Bank of England base rate

Ahead of today’s base-rate announcement from the Bank of England’s monetary policy committee (MPC) at noon, Paul Joyce, partner and specialist in market and deal activity in the financial and professional-services sectors, at LAVA Advisory Partners, shares his thoughts on what we might anticipate:

"If you’ve come to read about the Bank of England (BoE) doing something unexpected, you're looking in the wrong place. Rate holds have become the 'go-to' response for the Bank, and each time they're met with a market-wide shrug, but that doesn’t mean that they are a bad thing.

"The market is dealing with capricious inflationary pressures, geopolitical uncertainty and uneven confidence, so there is something almost reassuring about the MPC’s Groundhog Day impression every six weeks.

"In the twelve and a half years between April 2009 and November 2021, the BoE only changed the base rate five times. In the four and a half years since then, they've changed it 20 times. I know which of those periods I preferred.

"For dealmakers, this brand of boring can be good. Stability in the rate environment gives buyers, lenders, and management teams a little more confidence in their valuation assumptions, even if financing remains more expensive than it was a few years ago. It certainly makes running scenario analysis and upside/downside cases a little easier, and the range outputs a little narrower.

"Across professional services and financial services, we’re still seeing a healthy flow of transactions. Dealmakers aren’t waiting for the rates to drop, providing the fundamentals are strong, and while broader market conditions remain in flux, it’s largely business as usual in the M&A space for high-quality companies.”

www.lavaadvisory.com