UK Government Defends India Trade Deal Amid Worker Undercutting Accusations
May 7, 2025 — Business & Trade Desk —
The UK government is defending its recently finalized trade deal with India, rejecting criticism from opposition parties that it could harm British workers.
A key point of contention is the extension of National Insurance exemptions for workers on short-term visas—from one to three years—allowing them to contribute to their home country’s social security systems instead of the UK’s. Critics argue this could make Indian workers cheaper to hire than their British counterparts, especially after the UK raised employer NICs.
Business Secretary Jonathan Reynolds, who signed the agreement alongside India’s Commerce Minister Piyush Goyal, denied the claim, saying:
“There is no scenario where I’d allow British workers to be undercut. This deal follows similar double taxation agreements with countries like the U.S. and South Korea.”
Reynolds accused the Conservatives and Reform UK of misunderstanding the terms, emphasizing the exemption applies only to short-term secondments and mirrors international trade norms.
Former business secretary Kemi Badenoch slammed the deal, saying she had previously blocked a similar clause due to its “two-tier tax” structure, which she argues will cost the UK hundreds of millions. Lib Dem deputy leader Daisy Cooper added that the deal risks further economic strain during Trump’s trade war and amid Labour’s jobs tax.
Despite the political heat, Reynolds labeled the agreement a “huge economic win” for the UK, claiming it will generate higher wages, stronger growth, and more tax revenue.
Scotch Whisky and Export Gains
One major winner is the Scotch whisky industry, with tariffs set to drop from 150% to 75%, and eventually to 40% within ten years. The Scotch Whisky Association (SWA) says this could add £1 billion in exports and create 1,200 new jobs across the UK.
“This is a gamechanger,” said Jean-Etienne Gourgues, Chair of the SWA. “Millions who couldn’t afford our product now can. That means more jobs and long-term security for our industry.”
Other sectors expected to benefit include automotive, jewellery, frozen seafood, and clothing, with the government suggesting the cuts could lead to lower prices and more consumer choice.
Broader Access and Strategic Importance
The deal also gives UK firms unprecedented access to India’s £38 billion public procurement market, involving around 40,000 tenders annually. Only one other nation has such access, according to Reynolds.
Total bilateral trade reached £42.6 billion in 2024, and the government projects an additional £25.5 billion in trade by 2040 under the new agreement.
Reynolds emphasized that this is the largest UK trade deal since Brexit, with tangible benefits expected across Scotland, the Midlands, and Northern England, where key export-driven industries are based.
“This deal won’t just boost exports—it strengthens our position globally and drives regional development,” he said.
Despite the ongoing criticism, the UK government remains firm in its defense, pitching the deal as a cornerstone of its post-Brexit trade agenda.
