Starmer hails India free trade deal

UK-India Free Trade Deal: A Deal For Growth

The UK has secured ‘the best deal India has ever agreed’, providing businesses with security and confidence to trade with the fastest-growing economy in the G20.

The Prime Minister spoke to the Prime Minister of India Narendra Modi yesterday.

The leaders began by celebrating the landmark UK-India Free Trade Agreement announced today – a deal which will add billions to the UK economy, boost wages and deliver on this government’s Plan for Change.

In a huge economic win for the UK, delivering for working people and British businesses, the Prime Minister underscored the need to go further and faster to get things done, to secure and renew our country.

Through pragmatism and purpose, the leaders noted that this historic deal is the biggest the UK has done since leaving the EU, and the most ambitious India has ever done. Prime Minister Modi also thanked the Prime Minister for his decisive leadership in getting the deal over the line.

Turning to the terrorist attack in Jammu and Kashmir last month, the Prime Minister reiterated his deep condolences at the tragic and senseless loss of life.

Finally, Prime Minister Modi extended an invitation to India, which the Prime Minister was pleased to accept and said he looked forward to visiting India at the earliest opportunity.

UK-India Free Trade Deal: A Deal For Growth

The UK has secured the best deal India has ever agreed, providing businesses with security and confidence to trade with the fastest-growing economy in the G20.

Delivering Economic Growth

The core mission of this Government is to deliver economic growth that raises living standards and puts money in people’s pockets, and that is exactly what this deal will do. We estimate that it will increase bilateral trade by £25.5 billion, add £4.8billion a year to our economy and boost wages by £2.2 billion every year in the long run.^{footnote 1} This is the best deal India has ever agreed to.

It delivers on our manifesto commitment to create trade relationships that unlock new opportunities for businesses across all our nations and regions.

Case study – Standard Chartered

Standard Chartered is a leading UK-based international banking group with a presence in 53 of the world’s most dynamic markets. It is the largest and oldest foreign bank in India, acting as a ‘super connector’ of cross-border trade and investment by driving commerce and prosperity through its unique diversity for more than 165 years.

Saif Malik, CEO, UK and Head of Coverage, UK, Standard Chartered, said: “The UK-India Free Trade Agreement is a significant achievement. It will create new opportunities for UK and Indian businesses, enable greater access to one of the world’s largest and most dynamic markets, and drive growth and innovation across the UK-India corridor.

“We welcome this strong commitment to partnership and prosperity.”

Case study – UPS

UPS is one of the world’s largest companies, with 2024 revenue of $91.1 billion, and provides a broad range of integrated logistics solutions for customers in more than 200 countries and territories, including connecting the United Kingdom and India.

Markus Kessler, Managing Director, UPS UK, Ireland and Nordics, said: “We welcome the announcement of this important agreement between two countries that are both vital markets in our global network.

“We look forward to continuing to help businesses of all sizes across the UK reach new customers in one of the world’s most populous and dynamic countries.”

Future-Proofing Our Economy

This deal gives UK businesses first-mover advantage with a new economic superpower. Currently the biggest country in the world by population, India is projected to move from its fifth-largest global economy to third in the next three years, thanks to the highest growth rate in the G20.

By the end of the decade, it will be home to an estimated 60 million middle-class consumers, whose numbers are projected to grow to a quarter of a billion by 2050. And by 2035, their demand for imports is on course to top £1.4 trillion.

The enormous scope of this market, where British goods and services are already sought after, represents an equally huge opportunity for UK businesses in the decades to come.

Case study – John Smedley Ltd

Established in 1784 in Lea Mills, Derbyshire, John Smedley Ltd is a UK-based manufacturer and retailer of luxury knitwear.

Bill Leach, Global Sales Director, John Smedley Ltd, said: “India is one of the fastest growing luxury markets in the world, and we are very excited about the UK- India Free Trade Agreement coming to fruition.

“John Smedley knitwear is already sold in over 50 countries around the world, and now that the FTA has been finalised, we shall very much look forward to ensuring that an ever-increasing number of discerning luxury consumers in India will enjoy greater access to The World’s Finest Knitwear.

“We are thankful to DBT for their significant efforts in bringing this FTA to successful conclusion.”

Cutting costs for UK-India trade

From day one, this deal will support businesses across the United Kingdom by making it cheaper, easier, and quicker to trade with India. The deal will slash costs on UK exports, including whiskies and gin, cosmetics, medical devices, advanced machinery and lamb.

Based on current trade alone, India’s tariff cuts amount to £400m in the first year, going up around £900m after 10 years. And that’s before factoring in the savings from speedier and easier trade from improved customs and digital commitments. This immediate relief represents a major advantage our businesses will enjoy over their international competitors, helping them to invest, expand, and support more high-quality jobs.

Case study – Smith+Nephew

Smith+Nephew designs and manufactures technology that takes the limits off living. Smith+Nephew’s products include: Advanced Wound Management; orthopaedics and a robot assisted surgery system; and joint preservation and soft tissue orthopaedics.

Deepak Nath, Chief Executive Officer, Smith+Nephew, said: “Given the size of the Indian economy and its healthcare system, India is an important location for Smith+Nephew. The Free Trade Agreement offers the potential to build trading links in the healthcare sector.

“We hope that the Free Trade Agreement will enable Smith+Nephew’s innovative medical technologies to support more healthcare professionals to return their patients to health and mobility.”

Delivering opportunities for High-Growth Sectors

This deal supports the UK’s world-leading high-growth sectors identified in the Industrial Strategy, including:

Slashing tariffs for UK’s large and varied advanced manufacturing sectors, including for automotives, electrical machinery and high-end optical products.
Giving the clean energy industry brand new and unprecedented access to India’s vast procurement market, as India makes the switch to renewable energy, alongside their growing energy demand.
Unlocking new opportunities for medical devices firms within the life sciences sector, with reduced tariffs and rules of origin that factor in the UK’s complex supply chains and ensure that businesses can reap the benefits.
Enshrining copyright protections for the creative sector, enabling our exporters to feel confident exporting to India with a commitment that works will continue to be protected for at least 60 years. India will also commit to engaging on aspects of Copyright and Related Rights. This deal addresses the interests of UK creators, rights holders, and consumers, including around Public Performance Rights and Artist Resale Rights, which acknowledge the importance of payment rights. India will also conduct an internal review of their copyright protection terms.
Guaranteeing access for the UK’s world-class financial and professional business services sectors to India’s growing market. This is on top of securing India’s foreign investment cap for the insurance sector, ensuring UK financial services companies are treated equally to domestic suppliers, and encouraging the recognition of professional qualifications.
Securing India’s best ever commitments on digital trade for our Digital and technology sectors, such as promoting digital systems and paperless trade, helping UK businesses of all sizes take the opportunities on offer in this huge and rapidly expanding market.

Case study – Premier League

The Premier League is the world’s most-watched football competition, reaching 1.6 billion viewers in 189 countries around the world. The global success of the Premier League makes it one of the UK’s most significant soft power assets, amplifying British cultural values and generating economic growth and inward investment.

Premier League Chief Executive Richard Masters said: “India continues to be incredibly important to the Premier League and its clubs. It is a vibrant country that presents exciting opportunities and significant potential.

“The Premier League’s recent announcement of an office opening in Mumbai demonstrates our commitment to build on longstanding work to engage local fans, develop grassroots and elite football and further promote the game in India.

“The continued growth of the Premier League and UK businesses in India will have a positive impact on our domestic economy and we welcome the news of this new trade deal secured by Government, which will support UK businesses operating in India.”

Case study – EY

EY teams work across a full spectrum of services in assurance, consulting, tax, strategy and transactions. Fuelled by sector insights, a globally connected, multidisciplinary network and a diverse ecosystem of partners, EY teams provide services in more than 150 countries and territories.

Rohan Malik, EMEIA and UKI Government & Public Sector Managing Partner, EY, said: “This agreement is poised to accelerate an economic partnership that is already thriving, with the value of total trade between the UK and India having more than doubled from £16.6bn to £40bn over the last decade.

“British businesses stand to benefit substantially from enhanced access to one of the world’s largest export markets and a skills pool that can fuel strategically important UK sectors, including professional services and emerging industries based around data and AI.”

Case study – Concrete Canvas Ltd

Concrete Canvas Ltd is a Wales-based low-carbon concrete manufacturer.

William Crawford, Director of Concrete Canvas Ltd, said: “India is a dynamic and vibrant economy and an increasingly important market for Concrete Canvas products.

“A UK-India FTA will help to accelerate our plans for growth by reducing trade barriers and making us more competitive.

“This is welcome news for both UK and Indian businesses!”

Case study – Biopanda

Biopanda is a Belfast-based medtech manufacturer which exports in vitro test kits for clinical laboratories, veterinary practice, and food safety laboratories.

Philip McKee, Sales Manager at Biopanda, said: “Biopanda have been supplying a range of diagnostic products to the Indian market throughout the past ten years.

“We value the business we have done already throughout India and with the introduction of the UK-India FTA this should benefit in increased trade with the removal of export barriers.

“This will hopefully increase the market access, allowing our distributors throughout India to provide a larger range of our highly accurate clinical diagnostic products at a lower price to the consumer.”

Unlocking Opportunities Nationwide

Through our Plan for Change, this government will raise living standards in every part of the United Kingdom. This deal supports that goal, unlocking new opportunities in every region and nation.

This deal also opens a huge new market for iconic UK brands, securing India’s best ever tariff offer and providing access to India’s growing middle-class consumer base, which will give iconic UK brands the opportunity to expand their reach and influence.

This access includes cutting tariffs on whiskies from 150% to 75% at entry into force, following to 40% after 10 years, as well as on other agri-food products such as soft drinks dropping from 33% to 0% after seven years, and lamb dropping from 33% to 0% at entry into force.

Separately high-end cars will benefit from a drop from over 100% to 10% under a quota. We have also secured India’s best ever agreement on Rules of Origin, which enables UK businesses to take advantage of these new lower tariffs.

This deal will also support consumers as they benefit from the best of India and greater variety as our trading relationship grows, including clothing, footwear, and iconic food and drink. New commitments will also help protect consumers from spam texts from India, which could include requiring opt-out or prior consent.

Case study – Chivas Brothers Ltd

Chivas Brothers Ltd is part of the Pernod Ricard group of companies and exports over £2bn of Scotch whisky and gin every year, including brands like Chivas Regal, Ballantine’s, The Glenlivet and Beefeater.

India is amongst Chivas Brothers’ largest export markets and the biggest consumer of whisky worldwide by volume.

The UK-India trade agreement will help solidify and potentially expand on Pernod Ricard’s existing investments, which includes a €200m distillery construction in the Indian state of Maharashtra and £100m in bottling facilities in Dumbarton, Scotland.

Jean-Etienne Gourgues, Chivas Brothers Chairman and CEO, said: “The announcement of a free trade agreement in principle between the UK and India is a welcome boost for Chivas Brothers during an uncertain global economic environment.

“India is the world’s biggest whisky market by volume and greater access will be a game changer for the export of our Scotch whisky brands, such as Chivas Regal and Ballantine’s.

“The deal will support long term investment and jobs in our distilleries and bottling plants in Scotland, as well as help deliver growth in both Scotland and India over the next decade. Slàinte to the UK Ministers and officials who steered the deal though long negotiations.

Case study – Diageo

Diageo is a global leader in beverage alcohol with a collection of brands across spirits and beer categories sold in more than 180 countries around the world. These brands include Johnnie Walker, Crown Royal, J&B and Buchanan’s whiskies, Smirnoﬀ, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.

Diageo is a leading player in India’s beverage alcohol sector and is among the top 10 fast-moving consumer goods companies in India by market capitalisation.

Diageo has 50 manufacturing facilities across India, employs over 3,300 people directly in market with a further 100,000 jobs supported throughout its value chain. India is one of Diageo’s largest markets globally and accounts for almost half of its total global spirits volume.

Diageo Chief Executive Debra Crew said: “The UK-India Free Trade Agreement is a huge achievement by Prime Ministers Modi and Starmer and Ministers Goyal and Reynolds, and all of us at Diageo toast their success. It will be transformational for Scotch and Scotland, while powering jobs and investment in both India and the UK.

“The deal will also increase quality and choice for discerning consumers across India, the world’s largest and most exciting whisky market.”

Enhancing Security through our partnership

The UK and India already enjoy a deep and broad partnership built on our shared principles as two democracies, our commitment to the rules-based international order, strong ties in areas including culture, education, food, and sport, and of course through our living bridge – with some 1.9 million people with Indian heritage calling the UK their home.^{footnote 6}

This agreement encourages collaboration between our two complementary economies. It creates a framework to promote closer ties on innovation – including on new technologies in areas like agriculture, health, advanced manufacturing, and clean energy. And our agreement on business mobility will help experts on both sides deliver their services, enabling us to capitalise on the economic transformation that technology will bring over the course of this century.

Through this deal, we are showing the world that we stand for free, fair, and open trade. In an increasingly unstable and volatile world, this provides businesses with the confidence that they need to grow and expand. And as India’s approach to global trade changes, so can this deal. We have agreed in numerous areas that, if India offer a better deal to a different country, we can come back to the table to renegotiate for the UK.

Case study – Coltraco Ultrasonics

Coltraco Ultrasonics are high-exporting advanced manufacturers of ultrasonic instrumentation and systems, exporting 90% manufactured output to 120 countries. Coltraco have twice won the Queen’s Award for Enterprise in International Trade and have exported to India for 30 years.

Since 2019, Coltraco have won the contract for nearly 200 ships of the Indian Navy and Coast Guard and support in-service use and maintenance of their ultrasonic watertight integrity instrumentation on board.

Professor Carl Stephen Patrick Hunter OBE, Chairman Coltraco Ultrasonics Limited & Director-General The Durham Institute of Research, Development & Invention, said: “Coltraco Ultrasonics is strongly supportive of the India FTA Trade Agreement and proud to have modestly contributed to and advising the British negotiating team on various chapters.

“The UK private sector can now, because of the India FTA, the Windsor Framework CPTPP, and a variety of other UK FTAs, look out to the world, balancing our exporting and investment opportunities between the USA, the EU and Asia Pacific.

“It is a tremendous success and we thank British and Indian Civil Servants for their public service in the UK-India FTA.”

Unlocking Access to India’s Untapped Procurement Market

For the first time, UK businesses will have guaranteed and unprecedented access to India’s vast procurement market, covering goods, services and construction. UK businesses will be granted brand new access to approximately 40,000 tenders with a value of at least £38 billion a year.

This will unlock significant opportunities spanning a range of sectors, including transport, healthcare and life sciences and green energy. Alongside this UK firms will, for the first time, have access to India’s procurement portal, connecting them to the information they need to make the best out of these opportunities – which will grow as India builds the infrastructure necessary for an economic superpower with the world’s largest population.

UK companies will also get exclusive treatment under the ‘Make in India’ policy, which currently provides preferential treatment for federal government procurement to businesses who manufacture or produce in India. However, this unprecedented treatment will mean that if at least 20% of a company’s product or service is from the UK, they will be treated as a ‘Class Two local supplier’– granting them the same status that is currently only ever given to Indian businesses.

Case study – Arup

Arup is an employee-owned business that provides engineering and technical and advisory services dedicated to sustainable development. It is headquartered in the UK and operates globally with around 18,000 members. It is a trusted partner of the government in India and has delivered a wide range of projects including the Bangalore international airport, the iconic Statue of Unity, and the Indian Railways Station Redevelopment programme.

Paula Walsh, Managing Director, UK, India, Middle East and Africa, said: “Arup supports the UK–India Free Trade Agreement and the powerful role this will play in boosting investment, jobs and growth.

“It is an important opportunity to deepen our collaboration with partners in India, sharing UK skills and technical expertise to deliver resilient and future-focused solutions across transport, energy, and the built environment.

“We are proud to have been part of a recent delegation to India, sharing renewable energy expertise with government representatives and look forward to continuing this critical partnership.”

Protecting Our Values

Throughout the negotiations, we have championed our values – securing India’s first ever chapters on anti-corruption, consumer protections, labour rights, the environment, gender equality, and development.

We have protected the NHS, defended the UK’s interests, ensured the points-based immigration system is not affected, upheld our high food standards, and maintained our animal welfare commitments throughout.

This deal demonstrates our commitment to both workers and businesses, staying true to our values while driving economic growth.

First Minister calls for new support for industry

UK Government must “meet the moment” with decisive action

First Minister John Swinney has called for a new package of support for industry from the UK Government in the face of global economic uncertainty.

As financial markets react to global events, Mr Swinney has called on the Prime Minister and the Chancellor to change their fiscal rules and commit to a package of investment to support business, workers and consumers.

The First Minister said: “We are currently enduring a time of global financial and economic uncertainty and volatility. But while we are not immune to global trends, we can be confident in the strength of Scotland’s economy.

“Indeed, throughout my time in the United States since last week, there has been a clear confidence in Scotland as a place to do business and as a destination for investment.

“However, the global economy is clearly going through a time of upheaval and it is vital that we see strong action to meet the moment, support Scottish industry and ensure workers and consumers are protected.

“My government will continue to do everything in our power to do that, but given where powers over the economy sit, this will require clear, determined and decisive action from the UK Government.

“The old economic orthodoxies of Westminster will not be enough to meet a moment of real global challenge. The UK Government cannot meet this global uncertainty with austerity – we need to see a new approach which provides investment and support for industry as we are seeing in countries like Spain.

“It is now obvious that the era in which the UK Government’s fiscal rules were set is over. The Prime Minister and the Chancellor must accept that new reality, end their outdated commitment to the fiscal rules and deliver serious investment to support industry.

“And in the face of this economic volatility, the last move any serious government would implement is a tax on jobs. The increase in employer’s national insurance contributions was always the wrong move – but the Prime Minister should not risk further economic damage by making it more difficult for business to take on or keep staff. The Chancellor should abandon the national insurance hike immediately.

“The events of the last few days require truly bold action from the Prime Minister. He cannot simply respond to an unprecedented situation by continuing with a plan set in completely different circumstances and which already looks doomed to failure.”

Charter for Budget Responsibility: Autumn 2024 – GOV.UK

Tariffs: Fraser of Allander explainer

Despite was the US President says, tariff is – at least among economists – far from the most beautiful word in the English language. But it’s certainly the word of the week, and has been resurrected from the doldrums of interest in seemingly no time (writes Fraser of Allander Institute’s JOAO SOUSA).

What even is a tariff?

What we usually call a tariff is a tax on the importation of a good into a jurisdiction. The tax itself is called a customs duty in the National Accounts, and can be levied either as a specific (certain amount per unit) or ad valorem (that is, as a percentage of the price). The duty is payable on clearing customs and therefore payable on entering a territory legally for consumption, final or intermediate, and depends on two things: the good in question and its provenance.

A trade tariff is also the name of the overall regime: for example, see this link for the UK’s set of tariffs for each good from each jurisdiction.

What do economists know about tariffs?

Generally, tariffs are by themselves quite bad for the whole of the economy and for consumers. International trade allows countries to focus on what they have comparative advantage in, which means they can sell those goods (and services) abroad and import other countries’ goods that are produced more efficiently than otherwise would be the case.

Importantly, this is true even if a country is more efficient at producing all goods than others. This was the important contribution of David Ricardo in the 1810s, and focusses on the fact that not focussing on those more productive goods and services has an opportunity cost. So the system as a whole produces more and allows for higher consumption in all countries if they focus on their respective relative strengths.

Of course, the world is a lot more complicated than Ricardo’s original two-factor model. But even now – over two hundred years after On the Principles of Political Economy and Taxation – there is broad agreement that countries tend towards specialising in their comparative advantages and that in turns results in higher living standards.

Even some of the more nuanced views of the effects of globalisation and trade which have emerged in the last decade and a half, such as David Autor’s, is unequivocal about both the overall positive effect of trade on global welfare and on the US as a whole. His argument about the ripple effects on the US of China’s rise and entry into the global trade focusses on both the sectoral and geographical concentration of negative effects.

Who wins and who loses?

Imposing tariffs or increasing them has the opposite effect of trade liberalisation. It will increase prices somewhat to consumers: the extent to which it does will depend on how responsive consumers are to price and how much domestic production can satisfy any pent-up demand.

But most consumer goods which are imported are likely to see significant price rises, especially because of how large the increase in tariffs is. So US consumers as a whole will lose out.

Domestic firms producing goods in competition to those normally imported are the main winners in the short-run, at the expense of consumers, as they will pick up some of the lost international activity.

But the extent to which they gain will be tempered by their ability to source factors of productions, particularly intermediate goods, many of which will come from abroad and be therefore subject to tariffs. Their costs might well go up, which could negate many of their potential gains.

The US federal government will also gain some direct revenue, although imports will likely decline significantly, undercutting some of that increased revenue. The increase in prices is likely to slow economic growth in the US, both because of the hit to real household income and because the Federal Reserve will likely act to curb inflation. It’s possible that overall tax revenues will fall, even if tariff revenues increase.

Across the world, trade will slow down, especially with news of retaliatory tariffs. A general slowdown in trade is bad news for economic growth, and that is the overwhelming channel through which the shock will propagate worldwide. In the long run, slower growth far outweighs any other effect, and means that the world is less efficient at producing goods and services, leading to lower living standards across the globe.

Are there any sensible reasons for increasing tariffs?

The US President’s rationale for imposing trade restrictions is based on the fact that the US runs a trade deficit, and therefore is being taken advantage of.

This obviously makes no economic sense. A nation is not a firm, and so any analogy is misguided. Imports allow US consumers to benefit from more and cheaper goods, and enhances their living standards.

There is no macroeconomic reason to aim for a trade balance or surplus. This is a mercantilist idea that became discredited in the 18^th century.

That is to say nothing of the complete fallacy of division being implied by the Trump Administration, which appears to believe that the not only should the US run a trade surplus as a whole, but that it should do so with every country.

This is a preposterous idea, based on no coherent economic theory. It wouldn’t make sense even if one thought a trade surplus made sense to aim for. Which, to reiterate, it doesn’t. People derive utility from consuming goods and services, not from selling them.

The current account – which includes the trade deficit, but also other flows of funds such as investment – can and does matter. But it matters especially for smaller countries which cannot borrow in their own currency and may need hard currency. In those cases, tariffs can be an emergency measure to discourage imports.

Of course, this doesn’t apply to the US in any sense. The US dollar is the anchor currency of the world system, and that has allowed it to run large current account deficits for decades.

Tariffs have historically been used to protect nascent domestic industries from foreign competition. The history of their success is patchy, but the rationale is understandable if a sector is building up its capacity and would be initially inefficient, but could serve as a way of increasing innovation and growth in the future if it gets enough scale.

While this is an oft-cited reason, the dynamic problems are easy to see. Protection from foreign competition disincentivises domestic efficiency, and so the policy might fail as a way to drive competitiveness in the long run. There is also a danger of enhancing the power of firms benefitting from it, who will have a strong incentive to lobby for tariffs to be maintained – therefore improving their position at the expense of consumers.

Targeted tariffs can also be used as anti-dumping measures. The idea is that countries might try to subsidise their exporters – either for economic or other reasons, such as geopolitics – to drive out other countries’ manufacturers from the market.

This is essentially an argument against excessive market power, especially when it comes from countries with state-subsidised or controlled monopolies, and interacts with strategically important sectors such as military supplies.

For example, the European Union and the US have often used these against Chinese steel, arguing that there is an interest in maintaining domestic capability for security reasons. In the long run, however, it’s doubtful whether these tariffs are effective at achieving their aims if the difference in production costs is too large.

There’s also an argument that they could have been useful as a temporary tool to ease the transition to a world where China was entering the global trade system. In this view, tariffs could have slowed down exposure to cheaply made goods that almost overnight made whole industries uncompetitive in certain places in the US and across the Western world. But even if we think this might have been a good idea – and as we’ll explore later – it’s hard to see doing it now being enough to reverse what has happened.

How big an increase in tariffs is this, and what precedent is there?

It’s pretty big. The Yale Budget Lab calculates that the effective tariff rate will now be around 22.5%, up from 2.6% in 2023.

That would mean an 857% increase in the level of tariffs. The actual figures might be somewhat different because there might be some substitution towards lower tariff countries, but make no mistake: this is the largest relative increase in tariffs in a single year in the history of the United States, and will likely bring tariffs to levels not seen since Teddy Roosevelt’s presidency – higher, for example, than in the aftermath of the Smoot-Hawley tariffs of the early 1930s.

Chart: Effective tariff rates for the United States over its history

Source: US Bureau of the Census, US Bureau of Economic Analysis, Yale Budget Lab, FAI analysis

The US might be seen as a bastion of free trade, but that’s only true relatively recently. Tariffs were the main source of government revenue before the federal income tax was introduced in the 1910s, and as such were both a vehicle for trade policy and an important source of funds for military emergencies.

The War of 1812 in particular stands out as a time when it served that dual purpose, raising revenues to fight the UK and acting as a punitive measure for UK-originated goods. With the effective rate reaching over 60% of all imported goods (excluding gold and silver), it is still the high watermark for tariffs in US history.

The following decades saw a see-saw of trade policy. The Northeast of the US was much more protectionist, as it had a larger manufacturing base; Southerners, which sold so much of their cotton (produced using slave labour) to the UK, were much keener on lower tariffs to maintain good relationships with Britain.

After the American Civil War – when tariffs were hiked to provide revenue – the US protected many of its growing industries by maintaining tariffs high. This was followed by a further hike in 1890 by the newly Republican-dominated US Congress, which no longer used the fig-leaf of nascent industry protection – it was straight up shielding of industry from foreign competition.

After a gradual decline in tariffs under Woodrow Wilson, the US reacted back with the unmitigated disaster of the Smoot-Hawley tariffs of 1930. It was meant to shield the US from the worst of the Great Depression, but it did nothing of the sort. It increased unemployment, propagated the banking crisis and unleashed protectionism across the world and ensured the crisis was deeper and lasted for longer.

Since the end of the Second World War, the US has been moving – as has most of the world – to lower tariffs as part of the World Trade Organisation’s (WTO) predecessor, the General Agreement on Tariffs and Trade – until now. There have been sporadic increases on specific goods, but the effective tariff rate for the US has fallen from 10.9% in 1946 to 2.6% in 2023. The US federal government has also diversified its tax base, and customs duties are a minor contributor to its revenues.

Will this lead to reshoring? Structural change is not a two-way street

International trade generates quite diffuse benefits – lower prices and higher diversity of goods available, with each beneficiary getting a small boost which becomes very large when aggregated for a whole country.

But the losses are generally concentrated among those industries which have the most competition from abroad. If those are also heavily concentrated in the same places, and if workers find it hard to move and retrain, the quality of jobs they can find leaves their prospects heavily damaged. All these have been true in the US, with rural Appalachia and being significantly hard hit.

It’s probably true that economists were too sanguine about the effect that trade would have on totemic industries and on particular places. Looking back, a big bang of opening in one go in response to China joining the WTO might well have been the wrong way to manage the transition, and David Autor compellingly argues that it has probably contributed to the political make-up of today’s United States.

But as he says, the transition has happened – it won’t be undone, and it can’t be anyway. As we know full well in the UK as well, structural transformation is not a reversible process – all we can do is look forward to what can be done to manage things given where we are rather than row it back.

Broad-based tariffs are particularly badly suited to respond to sectoral effects. But even so, at the margin, there might be some new jobs in manufacturing in the US if some foreign producers’ goods are made uncompetitive by the new level of tariffs. But these are likely to be small in number, and may well be negative on net once we account for the effect of lower economic growth – particularly if it has an upward effect on the Federal Reserve’s policy interest rate. And it will hurt all American consumers.

The US is now a high-wage, service-based economy. Manufacturing is not what it was in the 1960s, and its competitiveness is on high-value added, high-skilled jobs. This will not bring back high-quality jobs for those without university degrees or return Rust Belt cities to their former glory – that moment has passed, and a new course must be charted. If only solutions were as easy as rolling back time.

To retaliate or not to retaliate – that’s the question

The UK Government appears to have breathed a sigh of relief, with the UK being hit with only the ‘baseline’ 10% tariff. Other countries and trade blocs have had higher tariffs imposed on goods from them, and have immediately retaliated.

Retaliation is not an economic decision; it’s a political one. To impose tariffs is to harm one’s domestic consumers (and voters), and so as an economic strategy by itself it makes little sense. But it can make sense from a political perspective if a country thinks it can force those imposing the initial tariff to think again, especially if producers who sell to those markets can yield significant influence.

One can see the attractiveness of retaliation, but it’s hard to see – at least for the moment – how retaliation might make the prospects of a lower tariff right now any better. But non-retaliation is a stance that politicians can find difficult to maintain, and therefore it wouldn’t be shocking if the UK Government changed tack.

Mostly, though, this is bad news for the Chancellor of the Exchequer

Rachel Reeves eked out as much headroom as she could in last week’s Spring Statement by cutting departmental spending and disability benefit. But her decisions – both last week and in the Autumn Budget – meant that she left herself no room for growth to be downgraded, or else her ‘iron-clad’ fiscal rules would be broken.

The main effect of the Trump tariffs and subsequent retaliations will be – as we discussed earlier – a retrenchment in global trade, which will in turn reduce economic growth globally. Across the world, less trade means less efficient production processes, and therefore lower output and/or higher prices for the same goods.

And that has substantial implications for an open economy like the UK. As the Office for Budget Responsibility highlighted in their scenario analysis, this sort of tariffs on a permanent basis would wipe out her fine-tuned headroom and would force her to tighten fiscal policy again if she wants to comply with her fiscal rules.

The Chancellor’s best hope, then, is that these tariffs turn out to be as short-lived as Trump Steaks.

João is Deputy Director and Senior Knowledge Exchange Fellow at the Fraser of Allander Institute.

Previously, he was a Senior Fiscal Analyst at the Office for Budget Responsibility, where he led on analysis of long-term sustainability of the UK’s public finances and on the effect of economic developments and fiscal policy on the UK’s medium-term outlook.

Fraser of Allander Institute downgrades growth forecasts

‘the picture is still one of subdued growth‘

Economic and business conditions in early 2025 showed limited improvement, as firms across Scotland brace for upcoming cost pressures.

This is according to the latest Economic Commentary from the Fraser of Allander Institute at the University of Strathclyde, which covers the latest data on the UK and Scottish economies.

The Institute’s economists have downgraded their growth forecast for 2025 and 2026 to reflect economic conditions in both the UK and the world economy. The Fraser of Allander now expects growth in 2025 to be similar to growth in 2024 at 0.9%, before increasing to 1.1% in 2026.

While GDP in Scotland and the UK grew over 2024, and inflation has continued to ease, the outlook among businesses remains pessimistic.

Inflation fell unexpectedly fell to 2.8% in February, offering some relief to households and policymakers. However, services inflation remains high at 5%, meaning the Bank of England is likely to remain cautious in cutting interest rates over 2025.

The easing of inflation comes just ahead of changes to the UK’s employers National Insurance system, which came into effect as of April. These increases are expected to raise costs for employers and are already weighing on business sentiment.

New data from the Fraser of Allander Institute’s Scottish Business Monitor shows that 94% of firms expect cost pressures to increase in the first half of 2025, with three in four businesses highlighting National Insurance changes as a significant concern.

Professor Mairi Spowage, Director of the Institute, said: “Economic conditions in 2025 are turbulent and uncertain, and are likely to remain so throughout the year. Therefore, the picture is still one of subdued growth. Many of the challenges businesses faced in 2024 – from rising costs to policy uncertainty – have not gone away.

“Added pressures from National Insurance changes and geopolitical instability risk dampening confidence and growth further. These tax changes will start to hit businesses next week, with many scaling back plans for workforce expansion and recruitment as a result.”

Alongside its regular economic analysis, this quarter’s commentary also includes a detailed look at Scotland’s disability and carer benefits system, exploring how many people are receiving support and how much this is expected to cost over time. Spending on these benefits is projected to nearly double between 2020-21 and 2029-30, adding further pressure to Scotland’s fiscal outlook.

The commentary also reflects on the UK Chancellor’s Spring Statement, which contained significant fiscal policy announcements despite efforts to downplay its importance. Cuts to departmental budgets and reforms to disability benefits signal tougher times ahead for devolved budgets.

João Sousa, Deputy Director of the Institute, said: “The Spring Statement had clear implications for Scotland. Although there is a modest short-term funding increase, the medium-term outlook is significantly more challenging, with Holyrood’s budget for day-to-day spending expected to be nearly £900 million worse off by 2029-30.

“We’ll learn more about what this means for Scotland when the Scottish Fiscal Commission publishes its next forecast in May, but it’s certain to be another significant pressure on the Scottish Government’s desk.

“The Chancellor has staked all her credibility on meeting her fiscal rules, but the buffer remains very small against the many risks encircling the UK economy, including those from global trade shocks. If any of those materialise, then we might be back in a similar position in the Autumn.”

You can see the full commentary here.

Cruise Ship Levy consultation

Views sought on proposed new power for councils

Local authorities could be given the optional power to introduce a tax on cruise ships that visit their areas in future.

The Scottish Government is seeking views on the practicalities of such a levy, as well as the potential market implications and effect on local economies and communities.

Analysis shows there were around 1,000 cruise ship visits to Scottish ports in 2024, bringing 1.2 million passengers – an increase of almost 400,000 per year compared with 2019.

Finance Secretary Shona Robison said: “The tourism sector is a crucially important part of the Scottish economy and cruise visits are increasing. The consultation will help to inform the Scottish Government’s decision over whether or not to bring forward legislation and it is really important that we hear from a wide variety of voices on this matter.

“Last year, we held events to hear the views of the cruise ship industry, local government, and others. We want to continue the helpful dialogue which started at those events, and explore further what a cruise ship levy could mean in a Scottish context.”

Consultation on a potential local authority Cruise Ship Levy in Scotland – gov.scot

The Scottish Government has no plans to introduce a nationwide cruise ship levy.

The areas that welcome the most cruise passengers are Invergordon, Orkney, Edinburgh, Lerwick, and Greenock, and the average ship in the five busiest ports carries over 1,000 passengers.

Oxbridge to become Europe’s Silicon Valley?

Chancellor unveils new plans to deliver the Oxford-Cambridge Growth Corridor that will boost the UK economy by up to £78 billion by 2035

Rachel Reeves will today vow to go ‘further and faster’ to deliver the government’s Plan for Change to kick start economic growth and put more pounds in people’s pockets.
Chancellor to unveil plans to unleash the potential of the Oxford-Cambridge Growth Corridor that will add up to £78 billion to the UK economy according to industry experts, catalysing growth of UK science and technology.
Comes after Chancellor last week announced National Wealth Fund and Office for Investment will take new approaches to spur regional growth across the UK.

Chancellor Rachel Reeves will today vow to go “further and faster” to kick start the economy, as she unveils new plans to deliver the Oxford-Cambridge Growth Corridor that will boost the UK economy by up to £78 billion by 2035 according to industry experts.

In a speech in Oxfordshire, the Chancellor will tell regional and business leaders that economic growth is the number one mission of this government and its Plan for Change. She will declare that Britain’s economy has “huge potential” and is at the “forefront of some of the most exciting developments in the world like artificial intelligence and life sciences.”

She will back the redevelopment of Old Trafford and will review the Green Book – the government’s guidance on appraisal – in order to support decisions on public investment across the country, including outside London and the Southeast.

The speech comes after the Chancellor last week announced a new approach for the National Wealth Fund (NWF) and the Office for Investment (OfI) to work with local leaders to build pipelines of incoming investment and projects linked to regional growth priorities. This includes the NWF trialling Strategic Partnerships in Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region and the OfI piloting an approach in the Liverpool City Region and the North East Combined Authority to connect their regions to central government and industry expertise in order to unlock private investment.

Reeves will say “low growth is not our destiny, but that economic growth will not come without a fight. Without a government that is on the side of working people. Willing to take the right decisions now to change our country’s course for the better.”

The Chancellor is expected to say: “Britain is a country of huge potential. A country of strong communities, with local businesses at their heart.

“We are the forefront of some of the most exciting developments in the world like artificial intelligence and life sciences. We have great companies based here delivering jobs and investment in Britain.

“And we have fundamental strengths – in our history, our language, and our legal system – to compete in a global economy.

“But for too long, that potential has been held back. For too long, we have accepted low expectations, accepted stagnation and accepted the risk of decline. We can do so much better.

“Low growth is not our destiny. But growth will not come without a fight. Without a government that is on the side of working people. Willing to take the right decisions now to change our country’s course for the better.

“That’s what our Plan for Change is about. That is what drives me as Chancellor. And it is what I’m determined to deliver.”

In her speech the Chancellor will announce:

The Environment Agency has lifted its objections to a new development around Cambridge that could unlock 4,500 new homes and associated community spaces such as schools and leisure facilities as well as office and laboratory space in Cambridge City Centre. This was only possible as a result of the government working closely with councils and regulators to find creative solutions to unlock growth and address environmental pressures.
That the government has agreed for water companies to unlock £7.9bn investment for the next 5 years to improve our water infrastructure and provide a foundation for growth. This includes nine new reservoirs, such as the new Fens Reservoir serving Cambridge and the Abingdon Reservoir near Oxford.
Confirming funding towards better transport links in the region including funding for East-West Rail, with new services between Oxford and Milton Keynes this year and upgrading the A428 to reduce journey times between Milton Keynes and Cambridge.
Prioritisation of a new Cambridge Cancer Research Hospital as part of the New Hospitals Programme bringing together Cambridge University, Addenbrookes Hospital and Cancer Research UK.
Support for the development of new and expanded communities in the Oxford-Cambridge Growth Corridor and a new East Coast Mainline station in Tempsford, to expand the region’s economy.
That she welcomes Cambridge University’s proposal for a new large scale innovation hub in the city centre. As the world’s leading science and tech cluster by intensity, Cambridge will play a crucial part in the government’s modern Industrial Strategy.
A new Growth Commission for Oxford, inspired by the Cambridge model, to review how best we can unlock and accelerate nationally significant growth for the city and surrounding area.
Appointment of Sir Patrick Vallance as Oxford-Cambridge Growth Corridor Champion to provide senior leadership to ensure the Government’s ambitions are delivered.

The Chancellor is expected to say: “Oxford and Cambridge offer huge economic potential for our nation’s growth prospects.

“Just 66 miles apart these cities are home to two of the best universities in the world two of the most intensive innovation clusters in the world and the area is a hub for globally renowned science and technology firms in life sciences, manufacturing, and AI.

“It has the potential to be Europe’s Silicon Valley. The home of British innovation.

“To grow, these world-class companies need world-class talent who should be able to get to work quickly and find somewhere to live in the local area. But to get from Oxford to Cambridge by train takes two and a half hours.

“There is no way to commute directly from towns like Bedford and Milton Keynes to Cambridge by rail. And there is a lack of affordable housing across the region.

“Oxford and Cambridge are two of the least affordable cities in the UK. In other words, the demand is there but there are far too many supply side constraints on economic growth in the region.”

Designed to take advantage of the region’s unique strengths and potential, the announcements are further evidence of the government’s modern Industrial Strategy in action as it seeks to create the right conditions to increase investment in our leading growth sectors like life sciences, artificial intelligence and advanced manufacturing.

She will add: “Taken together, these announcements show that for the first time a government is providing real leadership to deliver this project with a clear strategy for the entire region backed by funding for the housing and infrastructure we so badly need.“

The speech comes after the Chancellor last week announced a package of investment reforms to spur regional growth across the UK.

Rachel Reeves set out a new approach for the National Wealth Fund (NWF) and the Office for Investment (OfI) to work with local leaders to build pipelines of incoming investment and projects linked to regional growth priorities.

Putting local knowledge and leadership at the forefront, there will be tailored strategies for each region to ensure investment matches local needs and drives sustainable growth.

Putting the government’s Plan for Change into action, the Chancellor set out that the goal is to harness growth everywhere to rebuild Britain and usher in a decade of national renewal. Measures included the NWF trialling Strategic Partnerships in Greater Manchester, West Yorkshire, West Midlands, and Glasgow City Region and the OfI piloting an approach in the Liverpool City Region and the North East Combined Authority to connect their regions to central government and industry expertise in order to unlock private investment.

Science Minister, Lord Patrick Vallance said: “The UK has all the ingredients to replicate the success of Silicon Valley or the Boston Cluster but for too long has been constrained by short termism and a lack of direction.

“This government’s Plan for Change will see an end to that defeatism. I look forward to working with local leaders to fulfil the Oxford-Cambridge corridor’s potential by building on its existing strengths in academia, life sciences, semiconductors, AI and green technology amongst others.

“Together we will build the infrastructure and partnerships needed to join up this region’s academia, investors and business so that we can boost growth, deliver innovations and create new jobs that improve all our lives.”

Transport Secretary, Heidi Alexander said: “Well connected communities are a cornerstone for growth. East West Rail will not only provide better links and lasting benefits to Oxford and Cambridge, but to all the surrounding areas.

“I’m also delighted to announce a brand new station at Tempsford, which will be game changing for the region – allowing a new community and businesses to grow, unlocking faster and smoother access to opportunities, and delivering on the Government’s Plan for Change.”

S2G4KH Starling murmuration at RSPB Ham Wall, Avalon Marshes, Somerset

Responding to Rachel Reeves’ speech today on economic growth Roger Mortlock, CPRE countryside charity chief executive, said:

On airport expansion and the Lower Thames Crossing

‘The single biggest threat to the countryside is climate change. If the government expands Heathrow, Luton, City and Gatwick airports, the increase in carbon emissions will make a mockery of its commitment to reaching net zero by 2030.

‘Airport expansion will do nothing to boost UK growth. There has been no net increase in air travel for business purposes or in jobs in air transport since 2007. Recent research from the New Economic Foundation indicates that airport expansion will drive significant tourism revenue abroad, not bring it to the UK. To create the jobs of the future we need investment in low-carbon industries and transport, not more unsustainable expansion of the UK’s airports.

‘CPRE local groups in Bedfordshire, Hertfordshire, London and Sussex have been at the forefront of campaigns to prevent further airport expansion. If implemented, these proposals would have a devastating impact on some of the UK’s most valuable agricultural land, vital wildlife habitats and green spaces close to millions of people’s homes.’

On the Lower Thames Crossing

‘The proposed Lower Thames Crossing would also drive-up levels of unsustainable travel at a time when funding should be directed into sustainable public transport instead. CPRE Kent has highlighted how the crossing’s environmental and economic impacts on the local area would far outweigh any supposed benefits.’

On zonal planning reforms

‘We welcome the government’s plan to support the construction of more homes close to existing transport hubs, particularly in our towns and cities. Provided that they are genuinely affordable and built on brownfield land, these homes could help unlock growth by providing sustainable places to live close to where people already live, work and go to school.

‘Building more homes close to transport hubs must not be allowed to undermine the Green Belt, one of this country’s most successful spatial protections with huge potential to help address the climate and nature emergencies.’

On the planning regime for Nationally Significant Infrastructure Projects

‘It’s clear we’ve got to build a clean energy grid fit for the future but the best way to achieve this is with local communities involved from the start.

‘To speed up the planning system, the government should deliver on its commitment to fund hundreds of new planning officers.

‘The UK could learn from countries such as Ireland and Australia, which involve communities in decision making from the beginning, reducing the need for lengthy and expensive legal processes without eroding democracy. For everyone’s sake, we should be building consensus, not dismissing people with real ideas and solutions as ‘blockers’.

£3M FUNDING BOOST FOR EDINBURGH’S SMART DATA FOUNDRY

Smart Data Foundry (SDF) has been awarded £3 million funding to operate a new Financial Data Service, enabling more researchers to study the financial health of millions of households across the UK, by providing secure access to financial behaviours, economic resilience, and regional economic activity.

The funding is made by Smart Data Research UK, which is part of UK Research and Innovation (UKRI).

The new service, which will operate from SDF’s base at Edinburgh Futures Institute, will be part of a network of five other data services across the country.

Together, they will put the UK at the forefront of smart data research and innovation. Providing safe and efficient ways for researchers to access and use the smart data generated through everyday interactions with the digital world, including via mobile apps, navigation systems, social media and shopping.

Led by SDF’s Dougie Robb and Professor Chris Dibben from the University of Edinburgh, the new Financial Data Service will provide unprecedented insights into the economic health of the UK through secure access to de-identified banking and finance data from millions of households and businesses.

Since its establishment in 2022, SDF has earned national recognition for its work using anonymised financial data for public good, including research in partnership with NatWest Group into how Covid-19 affected how people earned, spent and saved during and post pandemic and its work with Sage and CEBR on their quarterly SME tracker.

Dougie Robb, SDF’s Interim CEO, said: “We look forward to joining five of the most forward-thinking data service organisations in the UK in this groundbreaking network. It will foster data sharing partnerships between academia, public institutions and private enterprise leading to public good outcomes which will improve the lives of people across the UK.

“In partnership with the University of Edinburgh (UoE) we’ve made great progress in holding and making available for public benefit research financial data resources. We have forged fruitful data partnerships with NatWest Group, Virgin Money, SAGE, and Equifax, and built a team of transdisciplinary experts with expertise across finance, banking, digital technology, product, data science, and information governance.”

Professor Chris Dibben added: “Understanding the financial situation of households across the UK is a vitally important for social and economic research. However this key aspect of economic life is often poorly measured in our research datasets or even absent.

“This investment by Smart Data Research UK in a Financial Data Service will allow us to change this situation, enabling more public benefit social and economic policy research. I am really excited to be working with Smart Data Foundry and SDR UK to deliver this significant new resource over the next three years.”

By partnering with financial institutions and leading research institutes, the new Financial Data Service will deliver insights into productivity, prosperity and health and wellbeing, providing access to detailed evidence about financial behaviours, economic resilience, and regional economic activity.

This data will enable researchers to tackle urgent policy challenges including the cost-of-living crisis, financial inclusion, the changing nature of employment, and productivity in different economic sectors and geographic places.

The service will enable a transformation in the UK’s understanding of how economic shocks and policy interventions affect different communities, helping policymakers design more targeted and effective responses to economic challenges.

Magdalena Getler, Head of Academic Engagement at Smart Data Foundry, said: “With the new Data (Use and Access) Bill currently going through Parliament, we are at the beginning of a new age for data.

“If successful, the new legislation will empower safe data use, access, and sharing for the good of society like tackling challenges such as the impacts of poverty and economic inactivity.”

Also awarded funding in this latest tranche was Smart Energy Data Service, part of the Energy Systems Catapult. All six will work collaboratively as part of the Smart Data Research UK programme.

These two new data services join four others previously announced:

· Imagery Data Service (Imago)

· Smart Data Donation Service

· Geographic Data Service

· Healthy and Sustainable Places Data Service

A strategic hub based within the Economic and Social Research Council (ESRC) will provide leadership and coordination. It will also offer common services and ethical guidance.

Joe Cuddeford, Director of Smart Data Research UK, said: “Our six interconnected services will enable researchers to access unprecedented insights across finance, energy, health, geography, and beyond – empowering innovative solutions to complex societal challenges facing the UK today.”

Stian Westlake, Executive Chair of the Economic and Social Research Council, added: “This investment in a new network of smart data services helps put the UK at the forefront of data-driven innovation.

“Data infrastructure is as critical to our shared prosperity as transport, water or power networks. When we invest in data infrastructure we are investing in economic growth, improved public services, and a more sustainable future.”

Ministers to ‘bang the drum for Britain’ at Davos gathering

Chancellor and Business Secretary at World Economic Forum’s Annual Meeting in Davos this week
Ministers will meet CEOs and investors to bang the drum for British business
UK delegation to tell global business leaders and investors that the time to invest in Britain is now

Impressions from the World Economic Forum Annual Meeting 2025 in Davos-Klosters, Switzerland 18 January 2025. Copyright: World Economic Forum/Thibaut Bouvier

Ministers will be banging the drum for Britain at Davos this week, with the most visible UK Government presence in recent years pitching the UK’s investment offer to top business chiefs.

Chancellor Rachel Reeves and Business and Trade Secretary Jonathan Reynolds will meet with leading members of the global business community to encourage them to put their money into the UK and back British business.

They will highlight the UK’s political and economic stability, making us an attractive place to do business. This is backed by an unashamedly pro-business government that is slashing burdensome regulation, launching ambitious planning reform, and leveraging our trade relationships with Europe, America, Asia, the Gulf and beyond to help businesses use Britain as their base to connect with exciting global markets.

The visit will continue to deliver on the government’s number one mission to grow the economy and raise living standards for working people, coming days after the IMF revised their growth forecast for the UK economy upwards for next year.

The government’s Davos attendance also follows a survey from consultancy firm PwC, who on Monday ranked the UK as the second most investible location globally after the U.S. – the first time the UK has secured this position in the 28-year history of the survey.

Chancellor of the Exchequer Rachel Reeves said: “Business leaders and investors need to know that the UK is where their businesses will flourish, so I’m meeting them face to face in Davos to make our case.

“We are one of the most exciting places in the world for them to put their money, with a history of innovation, a skilled workforce and a stable government that backs business. I will not rest until the UK economy is growing and this government is delivering on its Plan for Change, so we can put more money in people’s pockets.

“The time to invest in Britain is now.”

The Chancellor will be on the ground at Davos on Wednesday 22 and Thursday 23 January. She and the Business Secretary will speak at a Bloomberg event on Wednesday morning.

She will also speak at the Country Strategic Dialogue alongside Ruth Porat, president and CIO of Google and Julie Sweet, CEO of Accenture, to over 80 global CEOs and business leaders from across tech, financial services and green industries. In the evening the Chancellor will attend the Global Goals dinner.

On Thursday, the Chancellor will take part in a fireside chat with the Wall Street Journal to an audience of business leaders, following which she will speak at an economy roundtable with fellow finance ministers on global issues. The Chancellor will also speak at a lunch hosted by the CBI to an audience of 50 senior executives from UK-based businesses and international investors.

Meetings are planned with a wide range of CEOs and business leaders, including Jamie Dimon, CEO of JP Morgan, Jo Taylor, president of the Ontario Teachers’ Pension Plan, and David Solomon, CEO of Goldman Sachs – amongst others.

The Business and Trade Secretary will have bilateral meetings with many of his international trade counterparts, including Robert Habeck, Vice-Chancellor of Germany, Maros Sefcovic, Executive Vice-President of the European Commission and WTO Director-General Dr Ngozi Okonjo-Iweala.

He will also meet with a range of businesses and investors, including AON; Anglo American; AWS; Carlsberg; Capgemini; Honeywell; RWE; and SABIC.

Business and Trade Secretary Jonathan Reynolds said: “Britain is back in business under this government, and our Plan for Change is already delivering for working people.

“The UK is the most connected market on earth, and we will continue to be the home for innovative businesses looking to face outwards to the world. We’ve lifted barriers to investment and secured £63 billion at the International Investment Summit, creating thousands of jobs in the process.

“These investments promise better wages, stronger communities, and better services and I’ll be at Davos to build on this momentum.”

The UK Government’s presence at Davos will also be the most visible in years, with print and out of home marketing promoting the UK’s connectivity, openness and opportunity to coincide with the summit.

Chancellor’s National Wealth Fund ‘fuels 8,600 jobs in six months’

8,600 jobs fuelled across the UK by the Chancellor’s National Wealth Fund since July, with almost £1.6 billion of private investment unlocked, delivering on the Plan for Change.
Jobs and investment spread across UK’s growth sectors from clean energy to digital infrastructure, driving government’s number one mission to grow the economy
New deal also announced today for North Wales with £92 million committed to support crucial improvements to coastal flood defence barriers protecting business and homes.

Thousands of jobs have been fuelled by the Chancellor’s National Wealth Fund in the last six months, with almost £1.6 billion of investment unlocked, driving growth across all corners of the UK.

The Chancellor began work just days into office to establish a new National Wealth Fund (NWF) that would invest in the new industries of the future to create good jobs and opportunity across every part of the country. With £27.8 billion of firepower, the NWF will help drive the government’s Plan for Change and turbocharge growth across the country to raise living standards in every part of the United Kingdom.

The jobs that have been created will support the digital and clean energy sectors, including 6,500 expected to be created in the retrofit sector across the UK, with the NWF providing a financial guarantee that will see Lloyds and Barclays deliver £1 billion of funding to deliver improvements such as low carbon heating and insulation in social housing.

New figures reveal almost £1.6 billion of private investment has been leveraged into projects across the UK’s clean energy and growth sectors over the past six months. This includes to support faster broadband connections for thousands of businesses and households in Cornwall, Yorkshire, Lincolnshire and Cumbria, fuelling economic growth.

Millions of pounds have also been committed to help West Suffolk Council to decarbonise its buildings and transition its fleet to electric vehicles, alongside supporting the expansion of a successful rooftop solar scheme.

This innovative investment model has the potential to be replicated by other local authorities and means more businesses can benefit from low cost, low carbon electricity, supporting local businesses and the growth of the clean energy sector.

It comes as today, the NWF announces a loan of £92 million to support Denbighshire County Council’s crucial improvements to coastal flood defence barriers in Denbighshire, North Wales, protecting businesses and homes against the devastating impact of flooding, creating jobs and growth in the construction industry.

Chief Secretary to the Treasury Darren Jones said: “Growth is our national mission, and the cornerstone of our Plan for Change that will improve living standards and put more money in people’s pockets.

“And the National Wealth Fund is playing a vital part in delivering economic growth, securing over a billion of private investment since July in industries that turbocharge growth in our economy and create good quality jobs across the UK”.

The Chancellor announced in October how the NWF would drive long-term investment in Britain, working hand in hand with business to create new high skilled jobs right across the UK, helping make people better off.

To mobilise investment at pace, the NWF will expand on the UK Infrastructure Bank’s offer including additional financial instruments so it is more catalytic and will take on more risk to have a greater impact:

The NWF has more capital with £27.8 billion – inheriting UKIB’s £22 billion and having an additional £5.8 billion.
It has a renewed focus to support the delivery of the wider industrial strategy, and the Government’s clean energy and growth missions. At least £5.8bn of the NWF’s capital will focus on the five sectors announced in the manifesto: green hydrogen, carbon capture, ports, gigafactories and green steel.
The NWF will have increased resources and focus on conducting more outreach to identify expanded project pipelines and structure innovative transactions.
It will have a strong regional mandate to unleash the full potential of our cities and regions.

Chancellor on China: ‘Stable relationship that supports secure growth is in our national interest’

Chancellor visiting Beijing for the first UK-China Economic and Financial Dialogue since 2019 – seeking stability in relationship with world’s second largest economy to achieve secure and resilient growth.
Visit delivers on commitment to explore deeper economic cooperation made by Prime Minister and President Xi at G20 in November.
Reeves will also raise difficult issues, including China’s support for Russia illegal war in Ukraine and concerns over constraints on rights and freedoms in Hong Kong.

Making working people across Britain secure and better off is ‘at the forefront of the Chancellor’s mind’ while in Beijing this weekend for a UK-China Economic and Financial Dialogue (EFD).

Rachel Reeves will meet with her counterpart, Vice Premier He Lifeng, in the Chinese capital today for a series of conversations around the financial services relationship between the two countries, support for safe trade and investment and the importance of cooperation on global issues like climate change.

She will be joined by Bank of England Governor Andrew Bailey, Chief Executive of the Financial Conduct Authority Nikhil Rathi, and senior representatives from some of Britain’s biggest financial services firms as she seeks outcomes that benefit our businesses, support secure and resilient growth in the UK, and finance tackling shared global challenges.

The Chancellor’s visit follows a meeting between Prime Minister Keir Starmer and President Xi Jinping at the G20 Summit last autumn, where they discussed deepening the economic and trade relationship shared by the UK and China, in order to yield mutual benefits, support growth, and have candid discussion on issues where our views differ. As part of this, the Chancellor is expected to raise constraints on rights and freedoms in Hong Kong and to urge China to stop its material and economic support for the Russian war effort in Ukraine.

This is part of the consistent, long term and strategic approach that the government is taking in managing the UK’s relations with China, rooted in UK and global interests. The government will co-operate where it can, compete where it needs to, and challenge where it must, including to protect our values and national security as the first duty of government.

Ahead of her visit, Chancellor of the Exchequer Rachel Reeves said: “Growing the economy and raising living standards is front and centre of this government’s Plan for Change. That growth must be secure, resilient, and built on stable foundations, including through careful pragmatic cooperation with international partners.

“By finding common ground on trade and investment while being candid about our differences and upholding national security as the first duty of this government, we can build a long-term economic relationship with China that works in the national interest.”

While in Beijing, the Chancellor will also visit Brompton’s flagship store. The enduring British bike brand is celebrating its 50^th anniversary year, and its flourishing community in the Chinese capital as its foremost market is a major success story for UK exports to China.

In addition to building on the financial services relationship, the EFD will also seek to bring down barriers that British businesses face when looking to export or expand to China, supporting them to seize growth opportunities and follow in the footsteps of brands like Brompton, and other cornerstones of British culture and industry like Jaguar Land Rover, Unilever and Diageo – three companies whom Reeves will also meet with during her visit.

Reeves is also to visit Shanghai on Sunday to engage with representatives across British and Chinese business. Alongside London, the city is a leading global financial centre which has long been important for UK-China economic and financial links, including in financial services with the landmark financial market connectivity initiative between the London Stock Exchange and the Shanghai Stock Exchange entering its sixth year.

China is the world’s second largest economy and the UK’s fourth largest single trading partner, with a trade relationship worth almost £113 billion, and with exports to China supporting over 455,000 jobs in the UK in 2020.

UK stagflation crisis threat demands action

The UK economy is staring down the barrel of the stagflation gun, with stagnant growth and persistent inflation combining to create one of the most challenging financial environments in over a decade.

This is the stark warning from Nigel Green, CEO of deVere Group, as this week the 30-year gilt yield hit a staggering 5.25%—its highest point since the 2008 financial crisis—underscoring the scale of the issue.

He says: “Stagflation’s grip on the UK has been exacerbated by weak domestic growth, which under normal circumstances would prompt the Bank of England to lower interest rates.

“However, with inflation still uncomfortably high, policymakers find themselves in a precarious position, hesitating to make moves that could further weaken the pound and worsen price pressures.

Nigel Green continues: “For Chancellor Rachel Reeves, the situation is particularly dire. Her key fiscal rule—eliminating all non-investment borrowing by 2029—now hangs in the balance, as rising interest payments on debt eat into the Treasury’s capacity to act.

“Achieving this goal will demand either politically challenging tax increases or deep public spending cuts. Both measures will hurt economic growth, amplifying the stagflationary spiral.

“The rise in gilt yields signals growing investor caution about the UK’s economic outlook.

“Higher borrowing costs are creating ripple effects across sectors, from property to retail, as businesses and consumers alike face higher for longer interest rates. At the same time, the weakening pound, spurred by fears of stagnation, makes UK assets more attractive to international investors.

“For global investors, the UK’s predicament is not just a warning—it’s a call to action. Stagflation may erode domestic purchasing power, but it also opens the door to undervalued opportunities in key sectors, particularly for those with a long-term strategy.

“Fixed-income securities are more appealing given their higher yields, especially for those seeking safe havens in a turbulent global economy.”

While stagflation is a daunting challenge, it also forces innovation and adaptation.

“For investors with ties to Britain, this is the time to reassess portfolios, hedge against inflation, and identify sectors that can thrive in a stagflationary environment. History teaches us that industries such as energy, healthcare, and tech have shown resilience, even in periods of economic stagnation.

“The gilt market itself is worth watching closely. The recent yield spike suggests a shift in sentiment, but for those who act decisively, these higher yields could lock in significant returns over the medium term.

“Similarly, the weakening pound, while a burden for imports, is a boon for exporters and foreign investors looking to acquire UK assets at a relative discount.”

Nigel Green concludes: “The looming spectre of stagflation may sound like a warning bell, but it’s also a call for decisive action. The UK’s challenges are real, but so are the prospects for those who think globally and act strategically.”