After more than three years of negotiation, the United Kingdom and India have concluded a comprehensive free trade deal that resets one of the UK’s most strategically important bilateral relationships. Positioned as one of the greatest landmark UK trade deals since leaving the European Union, the agreement offers a combination of tariff reductions, improved professional mobility, and stronger regulatory cooperation. It is expected to have wide-reaching implications for British businesses, regional economies, and the country’s long-term trade strategy.
What economic impact can be expected from the UK–India trade deal?
The UK–India trade deal is projected to add £4.8 billion to the UK economy annually and increase bilateral trade by £25.5 billion by 2040. According to the Department for Business and Trade, exporters in sectors such as automotive, whisky, pharmaceuticals, and education are positioned to benefit the most. A £2.2 billion uplift in average UK wages due to improved market access and higher productivity is also anticipated. For businesses, the deal is a significant step.
Over 6,000 British small and medium-sized enterprises already trade with India, and that number is expected to grow. William Bain, Head of Trade Policy at The British Chambers of Commerce has highlighted the agreement’s potential to improve export confidence and facilitate new market entry for companies across all UK nations and regions.
Tariffs and market access: Whisky, cars and beyond
The trade deal opens up a huge market opportunity for iconic UK brands, giving them the chance to expand reach and influence. India’s high 150 per cent tariff on Scotch whisky will be gradually reduced to 40 per cent over ten years, providing a substantial boost for Scottish distilleries. The Scotch Whisky Association has welcomed the agreement as a long-sought step toward opening up the Indian market. Alongside this, other agri-food products, like soft drinks, will drop from 33 per cent to zero per cent over seven years. Another key beneficiary will be high-end British car manufacturers, as Indian import tariffs, previously over 100 per cent, are set to be reduced to just 10 per cent.
Simultaneously, other British products that will face reduced tariffs from India include a wide range of goods such as cosmetics, aerospace components, lamb, medical devices, salmon, electrical machinery, as well as popular items including chocolate and biscuits. The UK, in turn, has cut tariffs on clothing, footwear, jewellery, and some food products, such as frozen prawns.
National Insurance exemptions: Reducing costs for employers
One of the trade deal’s most business-friendly provisions is an extension of the reciprocal social security exemption for short-term workers. Indian workers temporarily assigned to the UK will be exempt from paying National Insurance contributions for up to three years. This reciprocal arrangement also applies to UK workers in India, aiming to prevent double taxation and lower employment costs for businesses operating across both countries.
This is expected to reduce the financial burden on employers hiring internationally and support the UK’s services sector, which relies on access to overseas talent. However, this development has, so far, been an optics disaster for the government – and they’ll need to change their approach if they want to put a stop to the ongoing press backlash.
Unlocking access to India’s £38 billion procurement market
As part of the trade deal, UK businesses will, for the first time, gain guaranteed access to India’s vast and previously restricted public procurement market. This includes sectors such as goods, services, and construction. British firms will now be able to bid on around 40,000 government tenders annually, valued at an estimated £38 billion, creating substantial new opportunities across key sectors like transport, healthcare, life sciences, and green energy.
This access is bolstered by the UK’s inclusion on India’s government e-procurement portal, allowing UK companies to view and compete for tenders directly, which is essential for engaging with India’s fast-growing infrastructure and development landscape.
UK companies will also benefit from preferential treatment under India’s ‘Make in India’ initiative in a further landmark provision. Under the new terms, if a product or service contains at least 20 per cent UK content, the company will qualify as a ‘Class Two’ local supplier, a designation traditionally reserved for Indian businesses. This status opens up eligibility for a range of federal government contracts and ensures a competitive edge for UK firms operating within India.
Environmental standards and climate tax
Not referenced in the free trade deal was the UK’s forthcoming Carbon Border Adjustment Mechanism, which will apply carbon pricing tax to imports from countries with lower environmental standards. During negotiations, India had pushed for an exemption from CBAM, with its trade minister warning shortly before the deal was finalised that India could consider retaliatory measures if such carbon-related levies were imposed on its exports in the future.
The exclusion of CBAM discussions suggests potential unresolved tensions around climate alignment, raising a question for future UK trade policy: Can economic and environmental goals be advanced together, or will they increasingly come into conflict?
Final thought: Turning the trade deal opportunity into action
The UK–India free trade deal sets the stage for a new era of trade-driven growth. For British businesses and regional economies, it offers potentially substantial opportunities. With improved access to a high-growth market, reduced tariffs, new service mobility pathways, and entry into India’s vast procurement system, the foundations for trade-led growth are now in place. Nevertheless, realising the trade deal’s full potential will depend on how quickly and strategically it is implemented across sectors and regions. Effective support, industry engagement, and regional coordination will be key to unlocking its benefits. How will the government collaborate with chambers of commerce to help businesses navigate the new rules? And could this model shape future trade agreements?
Featured image via Andy.LIU/Shutterstock
