Insights | 15 July 2026
The UK-India Free Trade Agreement: what does it mean for British businesses and investors?
The UK-India Free Trade Agreement creates significant opportunities for British businesses and investors in one of the world’s fastest-growing economies – although careful planning and appropriate risk management remains critical.
1. Overview of the agreement
On 15 July 2026, the UK-India Comprehensive Economic and Trade Agreement (CETA) entered into force, marking a significant milestone in the economic relationship between the two countries. CETA is one of India’s most ambitious trade agreements to date and the United Kingdom’s most significant trade deal since its departure from the European Union.
The UK government estimates that CETA could increase bilateral trade by GBP 25.5 billion and contribute GBP 4.8 billion to the UK’s GDP each year.[1]
2. Key features of the agreement
CETA establishes a comprehensive and wide-ranging framework governing trade relations between the United Kingdom and India. CETA’s most prominent features include:
- Tariff reductions: A central feature of the agreement is the reduction or elimination of tariffs on a substantial proportion of goods traded between the two countries. India has agreed to reduce tariffs on a wide range of UK exports, including automotive products, medical devices, cosmetics, whiskey and gin, aerospace products, and advanced manufacturing products. Some tariff reductions will take effect immediately, while others will be phased in over several years. The UK, in turn, will eliminate tariffs on 99% of Indian exports, including textiles, apparel, footwear, engineering goods, pharmaceuticals, jewellery, and a range of agricultural and food products.
- National treatment: India and the UK have agreed to accord each other National Treatment (NT) in areas such as the trade in goods (incorporating the standards under the WTO General Agreement on Tariffs and Trade 1994 (GATT)). CETA specifically extends such NT obligations to regional or state governments. Given that Indian states exercise independent taxation powers in a number of areas like the sale of goods (particularly alcohol), the inclusion of this provision will help ensure that any measures adopted by Indian states apply equally to domestic and imported goods.
- Services: Businesses operating in sectors such as telecommunication, professional and financial services, education, and construction will benefit from increased market access and greater regulatory certainty.
- Access to India’s public procurement market: One of the most commercially significant aspects of CETA is the opening of India’s public procurement market to UK businesses. For the first time, UK companies will enjoy guaranteed access to approximately 40,000 government tenders worth at least GBP 38 billion annually across sectors such as transport, healthcare, life sciences and green energy. The agreement also grants UK firms access to India’s procurement portal, improving visibility of tender opportunities. In addition, UK businesses will receive preferential treatment under India’s “Make in India” policy: products and services with at least 20% UK content will be treated as those of a “Class Two local supplier”, giving UK firms a status and competitive advantage previously reserved only for Indian businesses.
3. What should UK investors in India be mindful of?
CETA undoubtedly creates significant commercial opportunities. However, British businesses should continue to approach investments in India with careful planning and appropriate risk management.
- Ongoing BIT negotiations: CETA does not contain a comprehensive investment protection chapter. Instead, the UK and India have agreed to continue discussions regarding a separate bilateral investment treaty (BIT) to replace the 1994 UK-India BIT that India terminated in 2017.
While UK investors whose investments were made while the 1994 BIT was in force continue to benefit from key investment protections until 2032, any investment made since its termination in 2017 does not currently benefit from such protections. According to media reports, although India and the UK made progress on the negotiation of core investment protection provisions in the new BIT, including investor-state dispute settlement, negotiations reportedly stalled over the issues of taxation and Most-Favoured-Nation (MFN) treatment.[2]
At present CETA provides only for a state-to-state dispute settlement mechanism in the event of a dispute, rather than a right of direct recourse for investors against the state. And the mechanism even excludes a number of CETA chapters from its scope.
- Contractual protections: Robust contractual protections, particularly where investment treaty protection is unavailable or limited, remains critical. Investors should ensure that contracts with government entities, state-owned enterprises and private counterparties contain carefully drafted contractual provisions addressing regulatory change, force majeure, termination rights and compensation mechanisms.
Importantly, contractual dispute resolution mechanisms should be carefully considered at the outset of an investment. Where arbitration is chosen, investors should take care in drafting and negotiating the arbitration clause, including the choice of arbitral seat, governing law, and applicable arbitration rules. Selecting an arbitration-friendly seat such as Singapore, Geneva or London is of particular importance.
- Regulatory considerations: While CETA seeks to enhance market access and provide greater regulatory certainty in a number of areas, investors should remain mindful that India has a complex regulatory framework that varies across sectors and states. Thorough due diligence remains essential, particularly in relation to foreign investment rules, licensing and permitting requirements, environmental approvals, tax considerations, and sector-specific regulatory requirements.
4. Outlook
CETA creates significant opportunities for British businesses seeking to participate in one of the world’s most dynamic markets but provides no enforceable protections for investors. Businesses looking to take advantage of CETA to pursue opportunities in India should continue to monitor developments on the potential new UK-India bilateral investment treaty, and ensure in the meantime that they negotiate robust contractual protections.
References
[1] Department for Business and Trade, ‘UK-India Free Trade Deal: A Deal for Growth’ (GOV.UK) <https://www.gov.uk/government/news/uk-india-free-trade-deal-a-deal-for-growth> accessed 3 July 2026.
[2] “UK-India Investment Treaty Lets Companies Sue Government, Sources Say,” Reuters, 2 May 2025, available at: https://www.reuters.com/sustainability/climate-energy/uk-india-investment-treaty-lets-companies-sue-government-sources-say-2025-05-02/ (last accessed 6 July 2026); Adrija Chatterjee, “India Puts UK BIT on Hold over Taxation, MFN Issues; Talks Continue with EU, Saudi Arabia,” Moneycontrol (21 April 2026), available at: https://www.moneycontrol.com/news/business/india-puts-uk-bit-on-hold-over-taxation-mfn-issues-talks-continue-with-eu-saudi-arabia-13895198.html (last accessed 6 July 2026).
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