UK-India Free Trade Agreement

On 6 May 2025, the UK and India successfully concluded a free trade agreement (“FTA”) after over three years of negotiations. This is the UK’s fourth major post-Brexit trade agreement and comes at a time when both countries are actively negotiating bilateral trade relationships with large economies such US, and having recently concluded negotiations with the EU. These FTA is important not only for what it means for UK-India trade, but also for the potential trend it represents in a broader realignment of global trade.

India currently represents a small share of the UK’s trade portfolio—just 1.9% of exports and 1.8% of imports in 2024. However, as one of the world’s fastest-growing economies and with a population exceeding 1.4 billion, India offers substantial opportunities for trade expansion. The UK government projects that the FTA will increase annual bilateral trade by £25.5 billion by 2040 and contribute £4.8 billion every year to the UK economy. 

What’s in the deal?

While the legal text of the deal has not yet been released, the UK-India FTA reduces trade barriers and creates new opportunities for businesses in both countries:

Market access for goods: India will lower tariffs on 90% of UK tariff lines over the next ten years. This includes key UK goods exports such as whisky, gin, automotives, medical devices, and premium food items. For example, whisky tariffs will decrease from 150% to 75% initially and reduce further to 40% within ten years. While the headline rate for certain automotive products will reduce from 100% to 10%, this will be subject to a quota (the details of which are not yet clear). It will start with internal combustion engines (transitioning to include, over time, electric and hybrid vehicles). The UK will reciprocate by reducing tariffs for Indian goods such as textiles, footwear, clothing, and seafood. 

Services: The FTA reduces certain barriers for UK service providers. This includes UK companies no longer being required to set up a local entity to operate in sectors covered by the FTA and measures for mutual recognition of professional qualifications. Moreover, UK ownership and investment into Indian insurance and banking firms will be locked in at up to 74% and the FTA also sets out non-discrimination rules to ensure UK financial services companies are treated fairly in the Indian market. 

Procurement: The FTA provides UK businesses with guaranteed access to India’s government procurement market, which is worth approximately £38 billion annually. Clean energy and infrastructure are expected to be key beneficiaries.

Double Contribution Convention: Under the FTA, Indian workers on temporary assignments in the UK will no longer need to contribute to the UK’s National Insurance system, provided they remain covered by India’s social security scheme. Similarly, UK employees temporarily posted to India will be exempt from contributing to India’s social security schemes. This measure is designed to avoid double contributions and, although it has been the focus of some press coverage, it aligns with similar social security arrangements both countries already have. For example, the UK has comparable agreements in place with the EU and several other countries, while India has this exemption in place with France, Germany, and the Netherlands, among others. The deal does not extend to state pension eligibility for Indian workers or eliminate NHS surcharge requirements while working in the UK.

What’s not in the deal? 

Although the FTA has a wide scope, there are some key omissions: 

Excluded sectors: Tariff reductions exclude certain sectors that remain protected by both countries. For instance, the UK has kept core agricultural segments such as sugar, chicken, pork, and milled rice outside the deal. 

Carbon border taxes: While this may initially have been part of the FTA negotiations, this is now being separately negotiated. This is an issue that will likely also come up in the UK’s negotiations with the EU. 

Bilateral investment treaty protections: the FTA does not appear to include an investment protection and investor-state dispute resolution regime. India has recently entered into a BIT with the UAE that departs from its Model BIT (and India’s Model BIT will, according to the Indian government, be updated to make it more investor-friendly). A UK-India bilateral investment treaty was terminated in 2017.

Immigration and mobility: The UK government rejected any increases to the visas given for Indian workers in this FTA, although it is understood that this was one of India’s demands. 

What else does it mean for businesses?

Apart from the reduction in tariffs and barriers to entry, the FTA is expected to simplify regulatory compliance and reduce costs for companies seeking to build or expand operations across borders.

The legal text is currently being finalised, and each country will then begin their respective ratification processes, with the agreement expected to come into force by early 2026. 

The FTA serves as an important milestone for enhancing UK-India trade relations. As India continues to grow into one of the world’s largest economies, this partnership creates exciting opportunities for businesses across a range of sectors. Furthermore, the eventual outcomes of this agreement may influence the UK’s trade negotiations with other economies such as the UAE and Switzerland.