UK Borrowing Costs Hit 25-Year High

What it means for SME acquisitions, investors, and why ETA thrives in this environment.

30-year UK gilt yields have climbed above 5.5%, the highest since the late 1990s. In contrast, Germany pays just 2.7%, meaning the UK is borrowing at more than double the rate.

The UK now carries around £3 trillion of debt, over 25% of which is inflation-linked, the highest proportion globally.

Every tick up in inflation directly inflates interest payments. In June alone, £20.7 billion was borrowed, with £16.4 billion used solely for servicing old debt.

Forecasts show that debt interest spending in 2025–26 is expected to reach around £111.2 billion, or over 8% of total public expenditure, equating to more than 3.7% of GDP.

Why it matters for investors

• Debt-financed acquisitions are becoming much more expensive

• Valuations across private markets are adjusting lower

• Government budgets are squeezed as interest costs climb

What it means for SMEs

• Over-leveraged or poorly managed firms may struggle, and some may fail

• Cash-generating SMEs in essential sectors with low leverage continue to prove resilient

• Retiring owners are speeding up succession decisions and are now more likely to accept realistic valuations

• Banks stepping back leaves a gap for equity investors and creative financing

Why ETA works in this environment

Entrepreneurship Through Acquisition enables proven acquisition entrepreneurs to step into resilient SMEs, improve them, and build value without relying on cheap debt. This environment favours access to diversified, inflation-resistant, cash-generating businesses at attractive valuations.

How the B.O.R.I.N.G. Investment Club fits in

The B.O.R.I.N.G. Investment Club (Buy-Outs of Resilient INcome-Generating Businesses) offers eligible investors the ability to review curated and diligenced SME acquisitions led by proven acquisition entrepreneurs. We focus on sectors that remain vital regardless of macro volatility.

In today’s higher-risk environment, diversification is key. Members can build exposure across the best acquisition entrepreneurs, diverse businesses, industries, and geographies, reducing concentration risk while compounding opportunity.

Sources: Reuters, The Guardian, Investing.com, Financial Times