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Home»World»UK and India agree trade deal after three years of talks
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UK and India agree trade deal after three years of talks

May 7, 2025No Comments5 Mins Read
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Lucy Hooker

Enterprise reporter, BBC Information

Watch: PM hails UK’s “greatest commerce deal” since Brexit

The UK and India have agreed a commerce deal that can make it simpler for UK corporations to export whisky, vehicles and different merchandise to India, and lower taxes on India’s clothes and footwear exports.

The British authorities stated the “landmark” settlement, which took three years to achieve, didn’t embody any change in immigration coverage, together with in the direction of Indian college students learning within the UK.

Prime Minister Sir Keir Starmer stated the deal would enhance the financial system and “ship for British individuals and enterprise”.

Final yr, commerce between the UK and India totalled £42.6bn and was already forecast to develop, however the authorities stated the deal would enhance that commerce by a further £25.5bn a yr by 2040.

India’s prime minister, Narendra Modi, described the settlement as an historic milestone that was “formidable and mutually useful”.

The pact would assist “catalyse commerce, funding, progress, job creation, and innovation in each our economies”, he stated in a publish on social media platform X.

As soon as it comes into drive, which may take as much as a yr, UK shoppers are prone to profit from the discount in tariffs on items coming into the nation from India, the Division for Enterprise and Commerce stated.

That features decrease tariffs on:

  • clothes and footwear
  • vehicles
  • foodstuffs together with frozen prawns
  • jewelry and gems

The federal government additionally emphasised the profit to financial progress and job creation from UK corporations increasing exports to India.

UK exports that can see levies fall embody:

  • gin and whisky
  • aerospace, electricals and medical units
  • cosmetics
  • lamb, salmon, goodies and biscuits
  • increased worth vehicles

The British authorities stated the deal was the “greatest and most economically vital” bilateral commerce settlement the UK had signed since leaving the European Union in 2020.

UK Enterprise Secretary Jonathan Reynolds stated the advantages for UK companies and shoppers had been “large”.

Tariffs on gin and whisky, a key sticking level in negotiations beforehand, will probably be halved to 75%, with additional reductions taking impact in later years.

Tariffs of 100% on costlier UK-made vehicles exported to India will fall to 10%, topic to a quota limiting the whole quantity.

The deal additionally contains provisions on the providers sector and procurement permitting British corporations to compete for extra contracts.

Beneath the phrases of the deal, some Indian and British employees may even achieve from a three-year exemption from social safety funds, which the Indian authorities referred to as “an unprecedented achievement”.

The exemption applies to the employees of Indian firms briefly transferred to the UK, and to UK corporations’ employees transferred to India. Social safety contributions will probably be paid by employers and staff of their residence nation solely, quite than in each locations.

The UK already has related reciprocal “double contribution conference” agreements with 17 different nations together with the EU, the US and South Korea, the federal government stated.

Nevertheless, chief of the opposition Kemi Badenoch described the settlement as “two-tier taxes from two-tier Keir”, with Labour’s enhance in employer NI contributions from the Funds coming into drive final month.

Shadow commerce secretary Andrew Griffith stated: “Each time Labour negotiates, Britain loses”.

Liberal Democrat deputy chief Daisy Cooper stated it was “very worrying to listen to considerations that Indian employees coming over right here, firms could not need to pay taxes on these employees” and referred to as for MPs to be allowed to vote on the deal.

The federal government stated the Nationwide Insurance coverage exemption wouldn’t have an effect on NHS funding, since Indians working within the UK would nonetheless be required to pay the immigration well being surcharge.

UK Department for Business and Trade UK Secretary of State for Business and Trade Jonathan Reynolds and India's Minister of commerce and industry Piyush Goyal face-to-face looking cheerfulUK Division for Enterprise and Commerce

UK Enterprise Secretary Jonathan Reynolds and India’s Minister of Commerce and Business Piyush Goyal met in London final week to finalise the deal

India, at present the fifth largest financial system on the planet, is forecast to turn out to be the third-largest inside in a couple of years, making it a fascinating buying and selling companion for the UK, at present the world’s sixth largest financial system.

The UK can also be a excessive precedence buying and selling companion for Prime Minister Modi’s authorities, which has an formidable goal to extend exports by $1 trillion by 2030.

The deal is a win at no cost commerce at a time when US President Donald Trump’s sweeping tariff marketing campaign has put the concept on the defensive and raised fears of tit-for-tat commerce wars.

It seems to have elevated the impetus to strike this commerce deal.

Rain Newton-Smith, chief govt of enterprise foyer group, the CBI, welcomed the deal saying it supplied a “beacon of hope amidst the spectre of protectionism” following Trump’s wave of tariffs.

UK companies noticed “myriad” alternatives within the Indian market, she added.

Allie Renison, from communications agency SEC Newgate, and a former authorities commerce adviser, stated the deal was probably “transformational” resulting from India’s dimension, progress price and comparatively excessive current limitations to accessing its market.

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