Fuelled by surging energy prices, the increased value of imports, and weak export performance, the UK trade gap widened to a near record-high in the three months to July, according to the Office for National Statistics (ONS). The data additionally revealed that trade deficit in goods and services rose from £1.2 billion to £27 billion during this period, compared to the previous quarter – reaching a near all-time high. This comes as Liz Truss begins to carry out her duties, with the newly announced prime minister expressing her commitment to pull Britain out of its post-Brexit economic slump by deepening trade, defence and diplomacy ties with growing economic superpower, India.
With both parties publicly stating that they are working towards the completion of the UK–India Free Trade Agreement (FTA) by Diwali on 24 October, forming a strategic partnership with India is likely to be a leading concern for Truss. She’s previously expressed her admiration towards India’s wealth of talent, world-class security, and thriving science and technology sectors, stating that she sees “the UK and India in a sweet spot of the trade dynamics that are building up”.
Nayan Gala, founder of global investment banking platform, JPIN, that specialises in the UK–India corridor, explains that amidst Britain’s current trade frictions, the completion of a trade agreement with India could pump billions more into the economy, generate further employment opportunities, attract skilled talent to fill a severe shortage, and improve digitalisation and tech expansion. The UK–India investment relationship is already worth £25.7 billion and supports 110,000 jobs across the UK. This represents an increase of 35.2% or £6.7 billion compared to 2021, but experts such as Gala assert that although this growth is impressive, the FTA could cause the total value of trade between both countries to double by 2030, which would have profoundly positive effects on the UK economy.
This comes after India surpassed Britain to become the world’s fifth largest economy, marking a milestone achievement for the country. On track to become the fastest-growing economy by the end of the year, it’s already projected to be a fifth larger than the UK by 2027, according to the International Monetary Fund (IMF). The nation’s finance minister, Nirmala Sitharaman, has also announced that the Indian government was engaged in dialogue with foreign backers to ease regulations for investments, which alongside the potential trade agreement, will likely increase the scope of collaboration between both economies.
Nayan Gala, investment specialist and founder of JPIN, explains why a UK–India trade deal is critical for Britain’s economic growth:
“The newly released ONS data outlines the need for the UK government to forge new trade partnerships in order to reduce the deficit. Post-Brexit, there are a wealth of opportunities that can be found beyond Europe, with India seeming to be the current focus.
“At a time when economies around the world are facing significant macro-economic headwinds, the importance of increased trade collaboration between countries is really coming to the fore. We could be just a few months away from seeing a lucrative free trade agreement being signed by the UK and India, which stands to significantly benefit both sides.
“A Diwali deadline has been set, and there don’t appear to be many stumbling blocks that would prevent this from materialising. The UK-India relationship already supports 110,000 jobs in the UK, and foreign investment into Britain from India was worth £10.6bn in 2020, but this could just be the beginning of an even more fruitful relationship. It would also mark one of the biggest and most important steps in the post-Brexit era.”
