UK and India agree trade deal in 'transformational' boost for Scotch whisky

The UK and India have sealed a free trade agreement in a major boost to Scotch whisky.

In an agreement that will boost sectors hardest hit by Donald Trump’s tariffs, with dramatic tariff reductions on scotch whisky and car exports to India, while levies on aerospace, electricals and other food products will also fall.

UK consumers are also expected to benefit from tariffs being reduced on some Indian goods such as clothing imported to the country.

Prime Minister Sir Keir Starmer said: “We are now in a new era for trade and the economy. That means going further and faster to strengthen the UK’s economy, putting more money in working people’s pockets.

“Today we have agreed a landmark deal with India – one of the fastest growing economies in the world, which will grow the economy and deliver for British people and business.”

Business and Trade Secretary Jonathan Reynolds and Indian commerce minister Piyush Goyal held final talks in London last week after relaunching negotiations two months ago.

The deal means the UK will do significantly more business with the fast-growing economy of 1.4 billion people. It is estimated to add £4.8 billion to gross domestic product, £2.2 billion to wages and £25.5 billion to bilateral trade each year from 2040, the Government said.

Mr Reynolds said: “By striking a new trade deal with the fastest-growing economy in the world, we are delivering billions for the UK economy and wages every year and unlocking growth in every corner of the country, from advanced manufacturing in the North East to whisky distilleries in Scotland.”

Indian prime minister Narendra Modi described it as a “historic milestone” and an “ambitious and mutually beneficial” trade agreement that will “catalyse trade, investment, growth, job creation, and innovation in both our economies”.

The Government said the deal means tariff reductions on 90 per cent of exports that currently have levies, while 85 per cent will be fully tariff-free within a decade.

Whisky and gin tariffs will be halved from 150 per cent to 75 per cent before reducing to 40 per cent by the 10th year of the deal, while automotive tariffs will fall from over 100 per cent to 10 per cent.

Mark Kent, Chief Executive of the Scotch Whisky Association, welcomed the “transformational” deal.

He said: “The UK-India free trade agreement is a once in a generation deal and a landmark moment for Scotch Whisky to the world’s largest whisky market.

“The reduction of the current 150 per cent tariff on Scotch Whisky will be transformational for the industry. The deal has the potential to increase Scotch Whisky exports to India by £1bn over the next 5 years and create 1200 jobs across the UK. The deal is good for India too, boosting federal and state revenue by over £3bn annually, and giving discerning consumers in a highly educated whisky market far greater choice from SME Scotch Whisky producers who will now have the opportunity to enter the market.

“This agreement shows that the UK government is making significant progress towards achieving its growth mission, and the negotiating teams on both sides deserve huge credit for their dedication.”

William Wemyss Managing Director of Wemyss Family Spirits, which counts Kingsbarns Distillery near St Andrews, as well as Darnley’s Gin and Wemyss Malts among its brands, said: “The phased reduction of tariffs, from an immediate cut from 150 per cent to 75 per cent, with a target of 40 per cent over the next decade, changes everything. It finally gives us a fairer footing to compete in a market that has been out of reach for too long.

“This deal could open the door to sustained investment, new partnerships, and long-term growth not just for our own business, but for distilleries across Scotland. It’s a positive and pragmatic step in the right direction, and one that we hope will be implemented swiftly and effectively.”

In the House of Commons, Orkney and Shetland Liberal Democrat MP Alistair Carmichael said: “For those of us who have Scotch whisky industry interests in our constituencies this is very welcome news – apparently globalisation isn’t dead after all.”

Based on 2022 trade, this amounts to India cutting tariffs worth over £400 million when the deal comes into force, which will more than double to around £900 million after 10 years.

The deal also includes a double contributions convention – which will mean Indian workers coming to Britain, and British workers going to India, will not have to pay national insurance contributions in both countries for the first three years.