The UK / India Free Trade Agreement – opportunity for growth

The FTA builds on the Enhanced Trade Partnership (ETP) announced in May 2021, which formed part of the broader “2030 Roadmap” for UK-India relations. The roadmap envisioned closer collaboration across trade, defence, climate and health. Now, with a formal FTA agreed, businesses can prepare for a new era of trade marked by reduced tariffs, improved regulatory alignment and wider market access.

For the UK, the FTA demonstrates its post Brexit ability to negotiate independent trade deals. Since leaving the EU in December 2020, the UK has sought to cement bilateral relationships with high growth economies. India, projected to become the world’s third largest economy by 2035, appears to be a natural partner.

On 24 July 2025, The Department for Business and Trade (DBT) published the Impact Assessment on the UK-India Free Trade Agreement (Impact Assessment), which builds on the analysis in its technical note of the preliminary economic impact of the UK-India Free Trade Agreement.

In this article, we review the Impact Assessment’s explanation of the FTA and the sector opportunities and challenges that are presented.

Tariff Reductions

One of the most immediate benefits of the FTA will be the removal or reduction of tariffs on a wide range of goods. India has agreed to cut tariffs on 90% of UK exports, with 64% tariff free immediately and 85% tariff free within a decade.

• Spirits and beverages: UK whisky and gin currently facing tariffs of 150% will see duties fall to 75% at the FTA’s entry into force, and further to 40% after 10 years. Analysts predict UK beverage exports could rise by £700 million, a 180% increase.
• Automotives: Tariffs on UK cars, which can exceed 100%, will fall to 10% under a quota system. This is expected to provide a major boost to UK-based manufacturers.
• Machinery and pharmaceuticals: Exports from the UK to India of machinery, medical devices and chemical products are projected to expand significantly as a result of the tariff cuts and simplified technical standards.

Meanwhile, the UK will reduce tariffs on 99% of Indian goods, benefiting imports of textiles, apparel (including jewellery), footwear and food products. For UK consumers, this promises cheaper prices and greater choice on everyday goods, while businesses importing components from India stand to save on costs.

Investment and Investor Protection

Investment has been a longstanding concern for businesses. Many Indian companies established in the UK prior to Brexit did so partly to access the wider EU market, while UK investors have sought clarity on protections when entering India.

The FTA acknowledges the importance of investor protection provisions, covering principles such as fair and equitable treatment, most favoured nation clauses, and dispute settlement mechanisms. While a separate bilateral investment treaty remains under negotiation, the UK’s independence from the EU means it can negotiate investor protections directly, something that proved contentious in past EU deals with partners like Singapore.

Parallel Agreements: Double Contributions Convention

Alongside the FTA, both governments have agreed to negotiate a Double Contributions Convention (DCC), a standalone social security treaty that prevents workers on short-term assignments from paying social security contributions in both countries simultaneously. The UK already operates similar social security agreements with the EU and countries such as Switzerland, Norway and Canada. The government has presented the DCC as a mechanism to reduce friction for business and support labour mobility between the two countries.

However, the DCC has faced criticism, particularly from members of the UK’s Conservative Party. The opposition argues that exempting temporary Indian workers from National Insurance contributions could reduce UK Treasury revenues and make it more cost effective for employers to hire from overseas rather than domestically. Shadow Business Minister Dame Harriett Baldwin told MPs the DCC risked “subsidising Indian labour while undercutting British workers.”

The UK government has rejected these claims. Ministers stress that Indian workers will still face significant costs in the form of visas and the UK’s immigration health surcharge, meaning they would not be cheaper to employ than UK employees. Former Business Secretary Jonathan Reynolds insisted that “no one is being undercut” and that the agreement will instead provide clarity and support for companies engaged in cross border business.

The UK government has rejected these claims. Ministers stress that Indian workers will still face significant costs in the form of visas and the UK’s immigration health surcharge, meaning they would not be cheaper to employ than UK employees. Former Business Secretary Jonathan Reynolds insisted that “no one is being undercut” and that the agreement will instead provide clarity and support for companies engaged in cross border business. On 8 October 2025, UK Prime Minister, Sir Keir Starmer, was reported to have stated that the UK would not relax visa rules for India.

UK Sector Opportunities and Challenges

The FTA’s benefits will not be evenly distributed, but the overall picture appears positive. UK sectors expected to gain most include machinery and equipment manufacturing, chemicals, pharmaceuticals, beverages and financial services. The agreement also positions the UK to benefit from India’s vast previously underutilised market, which has long been constrained by complex local regulations and high logistical costs that make it difficult for goods and services to move across India. Press reports indicate that reforms such as the introduction of a goods and services tax in 2017 (that unified regions’ value-added taxes) and recent infrastructure investments have begun to ease these barriers, but challenges remain in areas such as land acquisition and labour laws. As these internal constraints gradually reduce, India’s domestic demand and productivity are expected to expand, creating a stronger base for trade with the UK. For India, textiles, apparel and leather goods exports are projected to rise sharply, with clothing exports to the UK increasing by 45%.

Some UK sectors could see slight declines, including textile and transport equipment manufacturing, reflecting increased competition from Indian imports. However, this does not mean these industries will shrink in absolute terms. The UK government reports that they will still expand over time, but at a reduced pace compared with a no FTA scenario. The Impact Assessment stresses that these relative losses are modest and are offset by larger gains in sectors where the UK has stronger advantages, such as machinery, chemicals, vehicles and financial services.

Wider Impacts: Environment and Third Countries

The UK government’s analysis highlights potential increases in greenhouse gas emissions linked to higher industrial activity and greater transport flows. UK emissions could rise by 0.21%, whilst India’s may increase by roughly 0.05%. However, ongoing decarbonisation policies and business practices are likely to mitigate some of these effects.

Additionally, the FTA could have wider effects on the economic and social development of third countries, such as Nepal and Sri Lanka. Due to changes in trade flow, there are expected to be losses in GDP of these countries of £0.1 billion by 2040. The UK’s Developing Countries Trading Scheme is designed to offset such effects by maintaining preferential market access by ensuring developing countries are subject to lower tariffs.

Unresolved Market Access

One notable omission in the FTA is legal services. Despite calls from the Law Society of England and Wales, the FTA does not address restrictions on foreign lawyers to form an establishment in India.

Looking ahead

The UK-India FTA marks a milestone in the UK’s post Brexit trade strategy and India’s gradual liberalisation of its trade regime. In July 2025 both governments celebrated early wins with nearly £6 billion in new investments in the UK and 2,200 new UK jobs anticipated as a result of the agreement.

While the FTA’s implementation still depends on ratification in both countries, it represents a major step in redefining the UK’s post Brexit global strategy. For businesses, the real opportunities will unfold in the coming years as tariff cuts are phased in, regulatory barriers fall, and new market access commitments take effect. While uncertainties remain, the FTA signals a mutually ambitious partnership.

In his October 2025 trade mission to India, Sir Keir Starmer was accompanied by over 120 business, academic and cultural leaders highlighting the UK’s intention not only to sign the deal but also drive early returns. The UK government reported that the mission resulted in the UK securing £1.3 billion of Indian investments into the UK, supporting 6,900 new jobs. This confirmed commitments from Indian companies to expand operations in sectors such as technology, defence and creative industries. The UK government announced that in total 10,600 UK jobs would be created by new deals struck during the mission. The scale of the delegation, and the priority given to business access and investment, sends a strong message of what is excepted by both governments from the FTA. As Sir Keir Starmer framed it, the deal is not just about cheaper goods or GDP growth but about strengthening ties between two global economies positioned for long term growth.