It's a tricky compromise but Starmer's India trade deal is a post-Brexit win

7 May 2025, 14:28 | Updated: 7 May 2025, 16:37

After three years of negotiation, the UK has clinched a significant post-Brexit win – a trade deal with India, the fifth largest economy in the world.

It is a deal that eluded the past three prime ministers, in spite of significant effort. According to government estimates, the deal could bring an annual £4.8 billion boost to UK GDP in the long run. Business and trade secretary Jonathan Reynolds has touted the deal as a “tremendous statement to the world”.

But there has been a backlash from some political figures. Part of the deal is a social security agreement, which exempts some temporary Indian workers from national insurance contributions to avoid ‘double taxation’. Reform leader Nigel Farage has claimed this is discrimination against Brits while Conservative leader Kemi Badenoch has said she refused to sign an equivalent deal when she was trade secretary. So who is right?

A more detailed assessment of the social security agreement suggests it is far less controversial than critics fear. These are common agreements that the UK has with a number of other trade partners, including the EU, Canada, and Japan. India pushed for the deal to avoid ‘double taxation’ of its workers employed by Indian companies who are temporarily seconded to the UK and face making social security contributions in both countries. Under current rules, secondees do not normally have to pay national insurance in the UK for the first 12 months. Once the deal is in force, this will be extended to three years.

The deal therefore only applies to a relatively narrow group of Indian workers, typically in high-paid work, rather than all Indians on work visas in the UK. Moreover, it extends a national insurance exemption that already exists for 12 months. Those opposing the deal did not appear to have any concerns about this existing exemption, or indeed about similar social security agreements the UK has negotiated with other countries. It is therefore not obvious why for them this new development is now a red line.

Ultimately, every trade negotiation requires tricky compromise. The issue of national insurance payments had been a sticking point in the UK-India negotiations for years. It is likely that a deal would not have been possible without the UK government moving on this issue. The same goes for any other trade negotiation – think, for example, of the UK-Australia free trade agreement and the backlash from British farmers, who felt their produce would be undercut after tariff reductions on sectors such as beef and lamb.

But compromise is essential to unlock the economic benefits of trade. In the case of the UK-India deal, products including whisky, cars, medical devices, and electrical machinery will face lower tariffs when trading with India. This will support sectors important to the UK’s industrial strategy, from advanced manufacturing to the life sciences.

This is a particularly important win given the wider economic context. President Trump’s tariffs have fired the starting gun on a new era of global uncertainty. While the India deal in and of itself will not be transformative for the UK economy, it could be part of a wider agenda of global economic diplomacy in this new era. One of the next key tests for the government’s international economic policy will be the UK-EU ‘reset’ summit on May 19.

The lesson from this deal is that, in the face of complex trade-offs, the government will need to find compromise if it wants to deepen its economic and strategic relationships. For a government prioritising its growth mission in an era of geopolitical turbulence, the UK-India free trade agreement is an easy choice. There will be far tougher trade-offs ahead.

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Marley Morris is the Associate Director covering Migration, Trade and Communities at IPPR.

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