It has been described as “the biggest and most economically significant bilateral trade deal the UK has done since leaving the EU.” On May 6, 2025, the United Kingdom and India signed the historic UK-India Free Trade Agreement (FTA), which both governments estimate will increase bilateral trade by $34 billion a year. This comes on top of a near doubling of the existing trading relationship between the two countries from $14 billion in 2014 to $22 billion in 2024. In June, both sides were in discussions to sign an ambitious investment agreement, similar in size to the FTA, to further enhance a relationship that already supports thousands of jobs across both countries.
The United Kingdom and India are working closely together in a time of geopolitical fragmentation. We believe the global reassessment of trade partnerships taking place, sparked by recent US trade actions, sets the stage for a shift in current trade corridors. As a result, business leaders around the world are exploring both defensive and offensive strategies, from revising operating footprints and optimizing supply chains to pivots and strategic investments.
Enduring attractions
The United Kingdom has many enduring strengths for Indian companies. Among them are its capital markets, which oversaw £9.1 trillion in assets under management in 2024—the largest capital market in Europe. The United Kingdom is also a leader in the energy transition, with the second-largest offshore wind pipeline globally. And its start-up ecosystem is the largest in Europe, surpassing $1 trillion in value in 2024.
India likewise presents enormous opportunities. McKinsey Global Institute identified 18 arenas that could generate up to $2 trillion in revenues for India by 2030, including in e-commerce, semiconductors, and urban construction. India’s services sector in particular has grown rapidly over the past decade, from approximately $149 billion in exports in 2013 to approximately $340 billion in 2024. The country has also increased its share of global manufacturing exports in multiple categories, with quality being a focus of both government (for example, the Zero Defect Zero Effect certification initiative) and the private sector. India’s homegrown innovation ecosystem is equally vibrant: its digital economy is growing 2.4 times faster than GDP, and the country is home to one in ten unicorns globally.
Asia’s emerging business corridors: New highways to growth
Deepening ties
The United Kingdom and India already enjoy a strong partnership based on shared culture, history, and systems of government. The UK-India FTA is a step to deepen that relationship. Tariffs on 99 percent of Indian exports to the United Kingdom and 90 percent of UK exports to India have been eliminated. Moreover, barriers for UK financial and professional services in India have been reduced. Indian workers and companies gain from the Double Contributions Convention that exempts short-term workers from UK national insurance contributions.
While the FTA establishes a path for an array of opportunities, the following six areas stand out where UK and Indian companies can work to capture new growth opportunities:
- Growth and innovation
Companies from both countries can use the FTA to drive job creation and innovation. The transfer of the latest services and manufacturing practices are opportunities for long-term economic growth. Indeed, the FTA could help UK GDP grow by £4.8 billion annually and advance India toward its target of $1 trillion goods exported by 2030. The enhanced movement of investment capital will be crucial to furthering both countries’ strong venture capital and unicorn landscape.
- The energy transition
Coupled with a new UK-India offshore wind task force announced in February 2025, the FTA paves the way for accelerating the energy transition and enhancing collaboration on smart power. Joint initiatives can be undertaken to support India’s goal of achieving 500 gigawatts of nonfossil energy capacity by 2030 and meeting 50 percent of its electricity needs from renewables. In particular, UK businesses can tap into India’s £38 billion procurement market, including clean energy.
- Global manpower
Employers will welcome new guidelines that ease the mobility of talent to the United Kingdom, especially in IT/ITES, financial, and professional services. Overall engineering, research, and development sourcing from India could increase from approximately $44 billion today to $130 billion to $170 billion by 2030. The challenge will be in aligning services and capabilities to take advantage of these provisions while furthering broader strategic goals, such as addressing skill gaps in both markets.
- Global supply chain linkages
The United Kingdom and India have a similarly constructive approach to establishing and maintaining global trade ties. The United Kingdom currently has 39 trade agreements in place with 73 partners; India has 13 active FTAs. Companies from both countries can look to maximize the benefits of the FTA and embed themselves more deeply in global production networks.
- Local market expectations
The FTA has opened a wider set of opportunities for consumer-facing companies through market access. India will have the second-largest consumer market in the world by 2030 with $4.3 trillion of consumer spending. By 2047, it could have more than 1 billion middle-class consumers offering companies significant opportunities to serve a large and economically evolving consumer base. The United Kingdom remains the sixth-largest economy in the world, with a highly advanced consumer sector. Companies will need to tailor their products, however, to win in each other’s markets where there are different expectations across quality, price, and proposition.
- Technology and artificial intelligence
The generative AI revolution holds the potential to reshape global productivity and generate up to $4.4 trillion in economic value worldwide. As this transformative technology becomes a focal point of geopolitical competition, business leaders from both countries can harness AI’s potential to drive economic growth and organizational innovation. In technology more broadly, there are opportunities such as collaborating on cybersecurity, intellectual property, and fintech, and reducing digital trade barriers.
There are several challenges that will need to be overcome before companies from the United Kingdom and India can make the most of these opportunities. Among the challenges are legal delays in dispute resolution, land laws, tax and compliance processes, and policy unpredictability. Additional challenges stem from ongoing global issues such as inflation, especially in commodity prices and crude imports, and climate-change-related vulnerabilities.
Though daunting, these challenges are not insurmountable. The United Kingdom and India are building a partnership for this new global era. Companies from both countries can capitalize on the opportunities to deliver growth, foster innovation, harness the promise of technology, and accelerate the energy transition through a 21st-century partnership.
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