11:06 am, May 7, 2025
The UK’s automotive industry has received a welcome boost after the government signed a new free trade agreement with India.
The deal will see tariffs on car exports to India slashed from over 100% to just 10% at a time when Donald Trump’s additional import charges are causing major headaches for carmakers.
The partnership was announced yesterday (Tues) afternoon with levies on aerospace, electricals, whisky and other food products also set to fall.
In response to the announcement, the SMMT welcomed the news and described it as ‘a historic first step’.
Mike Hawes, SMMT chief executive, said: ‘This signature of a UK-India FTA, the result of more than three years of complex negotiations, represents a historic first step in strengthening our already close automotive trade and investment ties and opening up mutual opportunities.
‘While the agreement will likely feature compromises, and might not offer unfettered market access to all UK automotive goods, we appreciate the considerable effort British negotiators have devoted to secure the first partial liberalisation of the Indian automotive market.
‘We trust the deal will be fair and deliver on essential UK industry priorities, with major tariff reductions on most UK automotive exports, favourable origin requirements and a workable agreement on future bilateral trade of electrified vehicles.’
UK consumers are also expected to benefit from tariffs being reduced on some Indian goods such as clothing imported to the country.
Prime Minister Sir Keir Starmer said: ‘We are now in a new era for trade and the economy. That means going further and faster to strengthen the UK’s economy, putting more money in working people’s pockets.’
He added: ‘Today we have agreed a landmark deal with India – one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business.’
The Tories talked up a trade deal with India for eight years, but never delivered.
My Labour government rolled up our sleeves and got the job done in 10 months.
We are delivering for working people. pic.twitter.com/Rf4xNiVioF
— Keir Starmer (@Keir_Starmer) May 6, 2025
Indian prime minister Narendra Modi described it as a ‘historic milestone’ and an ‘ambitious and mutually beneficial’ trade agreement that will ‘catalyse trade, investment, growth, job creation, and innovation in both our economies’.
More than a dozen rounds of talks involving successive governments have taken place since 2022 with the aim of securing a trade pact with India, which is forecast to become the world’s third largest economy.
Key sticking points had included high tariffs on Scotch whisky in India and visa rules for Indian students and professionals.
Delighted to speak with my friend PM @Keir_Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution Convention. These landmark agreements will further deepen our…
— Narendra Modi (@narendramodi) May 6, 2025
Business and Trade Secretary Jonathan Reynolds and Indian commerce minister Piyush Goyal held final talks in London last week after relaunching negotiations two months ago.
The deal means the UK will do significantly more business with the fast-growing economy of 1.4 billion people.
It is estimated to add £4.8bnto gross domestic product, £2.2bn to wages and £25.5bn to bilateral trade each year from 2040, the Government said.
Mr Reynolds said: ‘By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland.
‘In times of global uncertainty, a pragmatic approach to global trade that provides businesses and consumers with stability is more important than ever.’
