Page 186 - CW E-Magazine (17-6-2025)

Special Report

Building bridges, not ba rriers: Manufacturing wins

from UK–India trade pact

Is tariff uncertainty from the US ex- cosmetics, food & beverage, aerospace, and JACK LOUGHNEY
pediting trade deals for other regions? high value automotives will have tariffs Senior Data Analyst,
n the 6th of May, the United removed or reduced, while from India, Interact Analysis
Kingdom and India announced a clothing, food, jewellery, and some au- Jack.Loughney@interactanalysis.com
Obilateral trade deal allowing free tomotive will receive similar benefi ts.
trade in a range of goods and services. This is potentially quite signifi cant for The benefi ts are multiple to small and
India is projected to become the third lar- both regions as India accounted for just medium-sized enterprises (SMEs), which
gest economy before the end of the decade, under 1.8% and 2.3% of imports and make up 99.8% of British companies and
according to the International Monetary exports from the UK respectively in 2023, employment but face disproportionate
Fund (IMF), and has for some time been while India exported 2.5% to the UK challenges when trying to enter complex
foreign markets. On top of the tariff
effects, the Free Trade Agreement simplifi es
Rules of Origin, enabling more fl exibility
in sourcing and production. This means
UK fi rms could potentially incorporate
more non-UK inputs and still qualify for
preferential access to the Indian consumer
market. Additionally, the deal includes
cooperation mechanisms to support SME
engagement, such as dedicated government
portals, improved access to regulatory
guidance, and technical support initiatives.

The benefi ts from the trade deal could
Fig. 1: India MIO value & y-o-y growth (US$) provide a path to growth for the UK
reticent to agree to any trade deals. The and imported 1.3% in 2022, according manufacturing sector, which is currently
new agreement, therefore, could provide to International Economics. forecast to struggle for the rest of the
great benefi t to the ailing UK economy, as decade (Fig. 2).
well as helping to solidify India’s position The expectation is that this agreement
in the global economic pecking order. will increase bilateral trade by over £25-bn The benefi ts for India are also numer-
($33-bn) annually by 2040 and the UK ous, including duty-free access to the sixth
Figure 1 shows India’s manufactur- government has said it expects that GDP largest global economy and the 5th lar-
ing & machinery production and growth, and wages will increase annually by £5-bn gest consumer expenditure market. Benefi ts
highlighting its potential as a high-growth ($7-bn) and £2-bn ($3-bn). Politico reported on the labour side are strong too; employ-
region to 2030. that UK exports to India could rise by as ment-intensive industries such as textiles
much as £15.7-bn, a 59% increase. and foods will get direct tariff support.
Central to the deal is an agreement that Meanwhile, there is an agreement to allow
India will eliminate or signifi cantly reduce However, the deal goes beyond just easier access to the UK for Indian profes-
tariffs on 90% of UK goods exports, with tariff reductions. For instance, UK compa- sionals and both regions will benefi t from
85% being completely tariff free within 10 nies will be able to gain access to India’s the waiving of national insurance contri-
years. Simultaneously, the UK will make procurement market, allowing them to bid butions for the fi rst three years a worker is
99% of Indian exports to the region duty- on government contracts for goods, services in the other region.
free. In terms of what qualifi es, we will and construction. In addition, plans to
not know the full extent until the complete streamline the customs procedures should While the trade tensions between the
trade deal has been released. However, reduce trade costs and delays for British UK and China aren’t as front and centre as
we do know that on the UK export side fi rms. those between China and the US, the UK

186 Chemical Weekly June 17, 2025

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