+44 (0) 1908 774320
   
Roger Eddowes

Essendon Accounts & Tax

Home of the Business Godparent ...

Are Trade Deals Growth Drivers? Unpacking the Promise and Pitfalls of Recent Agreements

Roger Eddowes

CREATED BY ROGER EDDOWES

Published: 02/06/2025 @ 09:01AM

#AreTradeDealsGrowthDrivers #Economy #UKTrade #BrexitImpact #GlobalTrade

The recent trade deals signed by the UK with the US, India, and the EU prompt an essential inquiry: are trade deals growth drivers? While the government portrays these agreements as monumental victories, I think the reality is far more complex ...

Are trade deals growth drivers? Do they hinder growth? That's the economy's dance

Are trade deals growth drivers? Do they hinder growth? That's the economy's dance

Trade deals are often heralded as transformative; a new dawn of economic prosperity. The UK government's recent flurry of agreements with the United States, India, and the European Union is no exception. However, as the dust settles, I find myself asking, "Are trade deals really growth drivers?" They seem to be a mixture of optimism intertwined with disappointment.

The impetus behind the UK's rapid trade
negotiations is twofold!

Primarily, the government seeks to offset the ramifications of Donald Trump's erratic trade policies, which have ensnared the global economy in a labyrinth of tariffs. The aspirations for economic rejuvenation stem primarily from the desire to deliver tangible growth following Brexit. UK officials tout the potential for these deals to enhance growth projections, invigorate fiscal leeway, and bolster revenues. Yet, the reality appears less rosy when I think about it.

First and foremost, the bulk of the agreements are limited in their scope. Each one contains nuances and politically sensitive facets that could potentially undermine the gains they claim to deliver. Much of the content within these deals reflects intentions rather than solid commitments. This vagueness raises concerns about their effectiveness in truly revitalising the UK economy.

An example of this lies with the trade deal established with the United States. Initially perceived as a chance for the UK to boost its economic standing, the agreement has ultimately proved to be somewhat lacklustre. While it has successfully dismantled punitive tariffs - such as the 25% weight on steel, aluminium, and vehicles - these concessions come with caveats.

The favourable rates apply only to the first 100,000 cars shipped, limiting the possible gains. British goods still face a 10% tariff in the US, diminishing the likelihood of significant enhancements in UK economic growth. In fact, the impact is particularly evident for companies like Diageo, which faces an annual tariff bill of £112 million on its goods destined for the US market. Such burdens could prompt firms to reconsider their production strategies, possibly leading to a relocation out of the UK.

In contrast, the deal with India, while seemingly beneficial, also presents a mixed bag. British exports to India totalled over £17 billion last year; however, the Indian economy remains characterised by high protectionist measures, with tariffs soaring as high as 379%. Although the government projects that UK exports could increase by £15.7 billion a year by 2040, the trade deal's overall contribution to the UK's GDP is, according to HSBC, expected to be relatively modest at around 0.1%.

Established industries such as automotive, alcoholic beverages, and medical devices may well benefit, yet this gain is overshadowed by the sacrifices made, including reduced import barriers for US agricultural products.

Equally significant is the accord with the European
Union, the UK's largest trading partner!

This agreement represents 41% of all of our exports. The ramifications of Brexit remain evident, with studies indicating that the departure from the EU has indeed harmed the country's economy. This is further compounded by the Centre for European Reform's ‘doppelganger' modelling, which estimates a staggering £13.4 billion per quarter decrease in UK goods exports post-Brexit.

While I will always argue the resilience of UK-EU trade, these comparisons substantiate the assertion that withdrawal from the single market has indeed had adverse implications.

The Prime Minister has posited that the recent EU agreement will yield £9 billion in benefits annually by 2040. However, notable alterations like improved access to food and agricultural exports and enhanced defence collaboration come with their own set of complexities. For instance, food exports account for just 0.4% of the UK's GDP, meaning that any gains will only partially counterbalance the effects of Brexit. While the benefits brought about by easier business processes, particularly for smaller enterprises, are acknowledged, it remains critical to consider the inherent costs - both financial and political - with improved access to the EU.

Deutsche Bank estimates the long-term economic benefits of these trade deals could reach approximately 0.5% of GDP by 2040!

While these figures certainly reflect growth, they fall short of the ambitious growth projections set forth by the current government. I believe that, while the agreements are noteworthy, the actual growth they will catalyse may prove to be disappointingly minimal.

Admittedly, the potential for the UK economy to experience growth through these trade agreements exists, but expectations must be tempered with realism. As businesses grapple with the nuances of international trade dynamics, the question remains: are trade deals growth drivers? It would appear that the growth effects of these recent agreements could be eclipsed by the tariffs and systemic challenges that persist post-Brexit.

I believe that the UK's recent trade deals reflect
both ambition and caution!

As the economy continues to evolve, stakeholders will be watchful, seeking clear indicators of progress. The government may promise growth, but the pursuit of growth through trade deals may not yield the dividends that they originally anticipated.

I believe the real answer to whether trade deals are growth drivers will be revealed in the years to come, so we'll have to see what happens in the next couple of years.

I do find the whole subject quite fascinating.

Until next time ...


ROGER EDDOWES
Join our mailing list! Click here and be one of the first to know when we publish a new blog post!


Share the blog love ...

Share this to FacebookBuffer
Share this to FacebookFacebook
Share this to TwitterTwitter
Share this to Linkedin (popup window)Linkedin
Share this to Pinterest (popup window)Pinterest
Share this to WhatsApp (popup window)WhatsApp

#AreTradeDealsGrowthDrivers #Economy #UKTrade #BrexitImpact #GlobalTrade

About Roger Eddowes ...

Roger Eddowes 

Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

More blog posts for you to enjoy ...

Click here to view this blog post


HMRC Looking At VAT on Strawberry And Crème Sandwiches: A Sweet Dilemma

The recent buzz surrounding M&S's Strawberry and Crème sandwiches has thrust VAT on different products into the limelight again. Are these delightful creations zero-rated under UK VAT law, or do they fall into the dreaded 'co...

Click here to view this blog post


Bank of England Announces Ambitious Plans to Redesign Banknotes

The Bank of England is set to redesign banknotes for the first time in over half a century. This major initiative opens the floor for public input on themes like nature, innovation, and history, aiming to reflect a contempora...

Click here to view this blog post


7 Ways To Navigate Employee Well-being: Working During a Heatwave

As the UK faces record-breaking temperatures, employers have a profound obligation to ensure the comfort and safety of their staff. Heatwaves pose unique challenges, particularly for those employed in environments where the h...

Click here to view this blog post


The UK Economy Faces Significant Challenges Amid Global Turbulence

The latest data presents a concerning picture of the UK economy, marked by a significant contraction in GDP, declining exports, and rising unemployment. These indicators suggest that the momentum towards recovery may falter a...

Click here to view this blog post


Understanding the 31st July Deadline for Paying Income Tax and National Insurance

Although the 31st January is the usual date for paying Income Tax and National Insurance contributions in full, for many self-assessment taxpayers, the 31st July is another vital date to remember for those who need to make a ...

Click here to view this blog post


Understanding the Complexities of a Dress Code in the Workplace

When it comes to a workplace dress code, employers often grapple with the balance between professionalism and comfort, particularly as weather patterns shift towards warmer temperatures. The implications of a rigid dress code...

Click here to view this blog post


HMRC Looking At Increases in Wimbledon Prize Money

The rise in Wimbledon prize money to unprecedented levels presents not only an opportunity for players to secure substantial earnings, but also has implications for HMRC. Analysis reveals how both sides may benefit from the a...

Click here to view this blog post


Understanding HMRC's Communications with Persons with Significant Control Over Companies

HMRC has recently commenced a review involving persons with significant control over companies, prompting these individuals to reassess their income and gains for the tax year 2023/24. This initiative is intended to ensure co...

Other bloggers you may like ...

Click here to view this blog post


Key Virtual Assistant Onboarding Tips For Your Business Success

Posted by Sarah Hannaford on https://blog.sarahpasolutions.co.uk

When you decide to bring a virtual assistant (VA) on board, it's crucial to recognise that they aren't just another cog in the machine; they are vital ...

Click here to view this blog post


Referral Marketing: Gain Mastery By Copying Others

Posted by Jacky Sherman on https://www.jackysherman.com

One sunny day, when my son was about 4 years old, he'd been naughty, and I was telling him off. I suddenly noticed that he was copying my hand gesture ...

Click here to view this blog post


Unpacking the Property Tax Advantages of Being Married

Posted by Helen Beaumont on https://blog.essendontax.co.uk

Marriage offers profound property tax advantages, affecting Income Tax, Capital Gains Tax, Inheritance Tax, and more. Couples can maximise reliefs, al ...

Click here to view this blog post


No Inspiration? No Worries! Our Blogging Service Delivers Everything You Need

Posted by Steffi Lewis on https://www.sblogit.com

When inspiration runs dry, our versatile blogging service steps in to assist. At sBlogIt!, we create, manage, and share engaging content tailored to y ...

Click here to discover sBlogIt! The done-for-you blogging service