The UK government has announced that it is relaunching trade talks with India, as attempts to reach an elusive deal enter their 15th round of negotiations.
The business and trade secretary Jonathan Reynolds flew to New Delhi yesterday (23 February) to meet his Indian counterpart, Piyush Goyal, while investment minister Poppy Gustafsson is set to meet businesses in Mumbai and Bengaluru.
The trip follows the announcement that a Whitehall spending review is set to merge the Department for Business and Trade (DBT) with Gustafsson’s Office for Investment (OFI), in a move that could see a reduction in staff dedicated to export promotion.
Significance
A deal with India has been viewed as a post-Brexit priority by successive British governments, owing to its strong growth and the UK’s existing trading relationship.
The DBT statement highlighted that the Indian economy is set to go from being the fifth to the third largest world economy by 2028.
It adds that that this economic growth is creating a larger market for British exporters:
“With an expected 95 million-strong middle class by 2035, there are more and more opportunities every day for UK businesses to sell to consumers in India ready to buy British.”
Reynolds described pursuing a deal as a “a no-brainer” and “a top priority for me and this government”.
According to DBT stats, bilateral trade between the two nations was worth £40.9bn in the year to September 2024, with India the UK’s 11th largest trading partner. The figures also reflect an 8.6% increase (£32.bn) in trade over the same period.
Progress
UK-India trade talks were first launched under former Conservative prime minister Boris Johnson in 2022, with successive Conservatives PMs failing to secure a deal before ex-PM Rishi Sunak suspended talks ahead of last year’s July general election.
Speaking to the Guardian, Reynolds observed the lack of progress:
“We’ve seen trade secretaries come and go, and while their efforts have been sincere, it’s no secret that British businesses have nothing to show for it in terms of a final product.
“They need a trade deal they can actually use to cut costs, grow their business and expand in the massive Indian market. That’s what this government is going to get them.”
Blockers
Previous negotiations have stalled over Indian visas. The UK raised concerns about the social security contributions of Indian migrant workers returning to New Delhi, with Indian negotiators resisting Indian workers being required to pay twice. UK negotiators have also attempted to limit the number of skilled visas granted to Indian workers.
The UK itself has pushed for greater access to India’s services market, especially for its legal and accountancy firms. Currently, UK services exports to India total £9.8bn, an increase of over 3% on the previous year.
Reduced-tariff market access for UK goods such as whisky and cars has also been high on the agenda, and is especially pressing in light of US president Donald Trump’s recent tariff announcements.
Merging departments
As Reynolds and Gustafsson set off for India, the FT reported that their teams responsible for promoting inward investment are set to be combined under a Whitehall spending review, which could see a reduction in the number of staff working on export promotion.
Under the plans, the OFI’s 25-person team and a larger directorate set up to promote inward investment from within DBT would merge, with the OFI reportedly set to become the main agency for inward investment.
This follows a 2023 review of the UK’s investment landscape in which Lord Richard Harrington called for the OFI “to be given stronger backing from central government”.
It’s expected that, under its new remit, the OFI will lead on boosting investment in the UK’s regions by bolstering the role of regional mayors and supporting combined authorities to write investment proposals targeting foreign direct investment.
Insiders speaking to the FT have warned that the merger could result is cuts to DBT staff of around 30-40%, although DBT said that it “did not recognise” those figures.
