UK-India: A 21st Century Partnership
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 UK 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 a year in 2014 to $22 billion a year in 2024. Furthermore, in June, both sides were looking to sign an ambitious investment agreement, similar in size to the FTA, to further enhance an investment relationship that already supports thousands of jobs across both countries.
The two countries are working more closely together at a time of geopolitical fragmentation. There is a global reassessment of trade partnerships in light of recent US trade actions, which we believe sets the stage for a shift in current trade corridors. The recent wave of tariffs and other trade controls has created radical uncertainty for businesses. 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 UK has many enduring strengths for companies from India. These include the UK’s capital markets, which oversaw £9.1 trillion in AUM in 2024—the largest capital market in Europe. It is a leader in the energy transition, having the second largest offshore wind pipeline globally. Further, 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 areas such as e-commerce, semi-conductors, and urban construction. In particular, India's services sector has grown rapidly over the last decade from ~$149 billion of exports in 2013 to ~$340 billion in 2024. India has also increased its share of global manufacturing exports in multiple categories, with quality being more in focus both by government (such as the Zero Defect Zero Effect certification scheme) and by the private sector. And India's homegrown innovation ecosystem is vibrant: its digital economy is growing 2.4 times faster than GDP. India today is home to one in ten unicorns globally.
Deepening Ties
The UK and India already enjoy a deep and broad partnership based on shared culture, history, and systems of government. The UK-India FTA is a further step to accelerate the relationship. Tariffs on 99% of Indian exports to the UK and 90% 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 sets the path for an array of opportunities, six broad themes stand out where UK and Indian companies can work to capture new growth opportunities:
- Leveraging the FTA for growth and innovation
Companies from both countries can use the FTA to drive job creation and innovation. The transfer of the latest technologies, 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, too, to furthering both countries’ strong VC and unicorn landscape. - The energy transition
Coupled with a new UK-India offshore wind taskforce 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 500GW of non-fossil energy capacity by 2030 and meeting 50% 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 UK—especially in IT/ITES, financial, and professional services. Indeed, overall engineering, research, and development (ER&D) sourcing from India could increase to $130-170 billion by 2030, up from ~$44 billion today. The challenge will be to align services and capabilities to take advantage of these provisions while furthering broader strategic goals, such as addressing skill gaps in both markets. - Building global supply chain linkages
Both countries are trading nations with a similarly constructive approach to establishing and maintaining trade ties around the world. The UK currently has 39 trade agreements in place with 73 partners. Meanwhile India has 13 active FTAs. This means that companies from both countries can look to maximize the benefits of the FTA and embed themselves more deeply in global production networks - Adapting to 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 well have over a billion middle class consumers offering companies significant opportunities to serve a large and economically evolving consumer base. The UK remains the sixth-largest economy in the world, with a highly advanced consumer sector. However, companies will need to tailor their products to win in each other’s markets where there are different expectations across quality, price, and proposition. - Technology and accelerating 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 also opportunities such as collaboration on cybersecurity, intellectual property, fintech, and reducing digital trade barriers.
There are challenges and hurdles on both sides, which will need to be overcome before companies from each country can make the most of the opportunities. These would include legal delays in areas such as dispute resolution, land laws, tax and compliance processes, as well as policy unpredictability. Further challenges stem from ongoing global challenges such as inflation, especially in commodity prices and crude imports, and the vulnerabilities stemming from climate change.
These hurdles can be overcome because the UK and India are building a partnership fit for this new global era. Together, 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 modern, 21st century partnership.
Gautam Kumra is Chairman of McKinsey’s offices in Asia.
