The UK and India have signed a landmark trade deal that promises to reshape the economic landscape between the two nations, ushering in new rules for Indian companies and tech workers, as well as UK firms collaborating with Indian suppliers. The agreement, finalized on May 6, 2025, during discussions between UK Prime Minister Keir Starmer and Indian Prime Minister Narendra Modi, is expected to bolster trade significantly while providing opportunities for both countries.
Under the terms of this historic deal, tariffs on UK goods such as whiskey, cars, and clothing will be reduced, making British products more accessible to Indian consumers. Furthermore, Indian workers in the UK on three-year visas will no longer be required to contribute to the UK National Insurance system. This exemption particularly targets those on Intra Company Transfers, a visa category that has been predominantly utilized by Indian IT firms bringing workers to the UK.
India's Ministry of Commerce and Industry stated, “The exemption for Indian workers who are temporarily in the UK and their employers from paying social security contributions in the UK for a period of three years under the Double Contribution Convention will lead to significant financial gains for the Indian service providers and enhance their competitiveness in the UK market that would create new job opportunities, as well as benefit large number of Indians working in the UK.”
However, the deal has sparked controversy. Critics, including members of the Conservative and Liberal Democrat parties, argue that it could disenfranchise UK workers, especially in light of rising National Insurance contributions this year. In contrast, the Labour Party contends that these concerns stem from a misunderstanding, emphasizing that short-term workers are often exempt from social security contributions when working abroad, paying into their home country’s system instead.
In addition to the tariff reductions, the trade deal encompasses procurement agreements aimed at enhancing the UK’s clean energy sector, new regulations for medical devices, and the promotion of digital systems and paperless trade. The UK government hopes that the new national insurance regime for Indian workers will attract more companies to set up operations in the UK, as opposed to relocating to Silicon Valley or returning to India.
The agreement is anticipated to increase trade between the UK and India by £25.5 billion by 2040, with the UK economy projected to benefit by £4.8 billion during the same period, according to the UK’s Department for Business and Trade. The department highlighted that India currently imposes the highest average tariffs of any G20 economy, with some products facing duties exceeding 100 percent, which has historically limited trade opportunities.
Helen Brocklebank, CEO of Walpole, the official body for the British luxury industry, remarked, “India has been a sleeping giant for UK luxury for too long, and this deal will start to change that. India has a rapidly growing, affluent middle class, a booming ultra-high-net-worth individual community, and a well-documented love of British luxury brands. Tariffs on British luxury goods have been a huge block for Indian customers looking to buy the products they love.”
According to Euromonitor, India’s affluent consumer segment is expected to grow by 129 percent by 2030, with the middle class projected to reach a quarter of a billion people by 2050. A report by Kearney titled “India: The Next Luxury Hotspot?” indicated that India's luxury market could soar to $12 billion by 2028, up from $7.74 billion in 2023.
The sectors included under the agreement span textiles and apparel, gems and jewelry, processed foods, leather, and core industrial products such as chemicals, plastics, machinery, and base metals. This broad scope opens up substantial export opportunities across both traditional and emerging categories.
While established brands like Burberry have already made inroads into the Indian market, many independent British labels, including Emilia Wickstead and Jenny Packham, have yet to establish a significant presence. The new agreement may prompt these brands to reconsider their strategies and explore the Indian market more seriously.
Sunil Sethi, chairman of the Fashion Design Council of India (FDCI), expressed optimism about the deal’s impact, stating, “Zero-duty access is unheard of, and this will be a major boost for the textile industry.” Following the announcement, stock prices of large textile manufacturers like Gokaldas Exports and Arvind saw increases between 3 and 7 percent.
The historical context of the UK-India textile trade adds another layer to this agreement. The two nations share a deep-rooted textile trade history that dates back centuries, though this relationship faced significant disruptions during the early 19th century when the British government imposed bans on Indian textile imports to protect domestic mills. This move crippled India’s once-thriving handloom sector and altered global trade dynamics.
Today, the cultivation of indigenous cotton crops in India presents an opportunity to create a more resilient, ethical, and climate-conscious supply chain, but this requires a reintegration of these practices into modern agriculture.
India’s textile traditions have long attracted luxury houses to its artisans, with brands from Dior to Temperley London engaging Indian embroidery and weaving communities. Adam Shapiro, co-founder of the London-based label SMR Days, noted that clearer trade classifications would not only support craftsmen but also help preserve heritage techniques passed down through generations.
As the UK and India embark on this new chapter of trade relations, Indian designers are also eyeing opportunities in the UK market. In 2023, India’s Apparel Export Promotion Council (AEPC) reported that exports to the UK reached $1.2 billion, capturing 6.14 percent of the UK’s textile market. With the new trade deal, that figure could potentially double.
Many Indian designers, including Anita Dongre and Sabyasachi, have flagship stores in New York, but there is a growing interest in establishing a presence in London, particularly if the UK economy remains stable. Sethi believes that the jewellery sector will also see significant growth, stating, “There were already a few Indian designers looking to open their stores in the UK — this will greatly benefit them.”
Kanika Goyal, founder and creative director of KGL, who showcased at London Fashion Week for Spring/Summer 2025 but opted out of the most recent season, remarked, “The United Kingdom is a market not performing so well for global designers, but this might encourage Indian designers to look for prospects in this market.”
