After doing so much to stabilise the UK economy at the end of last year, the Prime Minister has started to shift gears towards a sustainable path to economic growth.
Both Sunak and his chancellor Jeremy Hunt have made our future growth a cornerstone of recent speeches. There is much to applaud in this pivot, but there was one thing missing: trade. International trade is essential to growth as it allows businesses to tap into opportunities abroad – increasing revenue and allowing firms to sell products and services in new and exciting markets.
Following Brexit, the UK’s ability to negotiate its own free trade agreements (FTA) with countries around the world was lauded as the way to grow the economy. However, despite striking deals with Japan, Australia, and New Zealand, we are yet to realise the full potential of trade independence. In particular, we are yet to strike a deal with India – the fastest-growing country in the world, according to the IMF.
An FTA between India and the UK has long been on the table and was initially promised by Diwali last year. More than a year later, and we’re still several rounds of talks deep. There has been some progress, such as the UK-India Young Professionals Mobility scheme, but signs of a breakthrough deal are still thin on the ground.
Ending the stalemate would open the doors for a game-changer of an FTA for the UK, if the right barriers are addressed. A pact with India has the potential to boost trade by £28bn a year by 2035 and increase wages across the UK by £3bn. The FTA could also allow the UK’s world-leading renewables sector to play a larger role in India’s transition to clean energy. India has committed to getting 50 per cent of its energy from renewable sources by 2030, reducing tariffs on green exports such as solar, onshore, and offshore wind. The breadth of this future industry offers all kinds of opportunities for UK firms.
A deal would create a flow of skills, investment and ideas between British businesses and the fifth largest economy.
Merging business and trade into a new department headed by Kemi Badenoch is a step in the right direction. But it needs to do what it actually says on the tin, and focus on trade.
Badenoch has pledges to seal with deal with India, but it needs to be a priority of Rishi Sunak, the chancellor and the business community as well. This is just as important once a deal is signed, as utilisation rates for trade agreements in the UK are low compared to our European counterparts.
The CBI has launched our first ever international trade delegation to India, as we try and help firms realise the opportunities of the potential FTA.
We could be on the cusp of signing a deal bolstering ties with a country of 1.4bn people, 7 per cent GDP growth and the biggest economy in the Commonwealth. But we won’t get it across the line if it simply becomes another sidelined priority.