Four factors that could complicate an India-UK deal post-Brexit

Four factors that could complicate an India-UK deal post-Brexit

Guest author Lisa Woods gives her views on four key factors that could help shape a post-Brexit trade deal between the UK and India.

As the UK continues to work toward some form of its planned “Brexit” from the European Union, a fresh trade partnership with India will need to be worked out. Officials on both the British and Indian sides have indicated an understanding of the need to establish a deal quickly. And yet, unfortunately, the turbulent state of Brexit makes it almost difficult to imagine a comprehensive trade agreement being struck with any kind of real urgency.

Specifically, there are several significant factors which could stall or complicate a new deal between the UK and India following Brexit.

Turmoil In The UK

Much of the focus on how the UK will adjust to Brexit tends to revolve around economics and immigration. For nations like India that will be looking to secure new trade agreements with the UK and avoid significant disruption to whatever extent possible, it’s important to bear in mind that the UK is also likely to face a significant degree of internal turmoil. Quartz reports about leaked documents from the government indicate, in fact, that Britain expects resource shortages, rising costs, and protests throughout the country. These issues are described as likely, rather than as a worst-case scenario, and if things within the UK get ugly enough, international trade negotiations could take longer to work out.

A Falling Pound

It’s impossible to predict with total accuracy what will happen to British currency in the event of a no-deal Brexit, but it will be worth keeping an eye on forex markets to see. Measuring the pound against the U.S. dollar, which is a common means of assessing its strength, 2019 has seen the continuation of a gradual decline since early 2018. And over the same time period, the trusted global forex resource FXCM shows a rather sharp decline for the Euro against the U.S. dollar – indicating the overall uncertainty of European economies of late. Should these trends continue, with the Euro and pound both losing value post-Brexit, it could complicate some of the UK’s economic priorities and further delay meaningful negotiations with India.

U.S. Uncertainty

Unless one considers the EU as a whole, the United States remains Britain’s single biggest trading partner. That is to say, the U.S. takes in more UK exports than any one country in Europe or anywhere else, and by a fair margin. This is significant regarding India’s own position in Britain’s trade future because the U.S. will be a top priority – and many not itself be in a strong position to negotiate deals with any efficiency. 2020 is an election year in the U.S., and will be a contentious one at that. It’s conceivable that if a no-deal Brexit takes effect by the end of January, as is currently the plan, the U.S. will be unable to form a new deal with lasting, concrete terms, after the 2020 elections in November.

British Priorities

This falls in line with the previous point, but we should point out that there are already specific indications that new trade deals with India will not be at the top of the UK’s list. According to reports by Hindu Business Line, Britain appears to have a list of “first tier” countries it will prioritise dealing with following a Brexit, and India is not on that list. This doesn’t mean that the trade relationship isn’t seen as important, nor that new deals won’t eventually be worked out. But the UK will focus more urgently on other countries, which could make the future of the India-Britain relationship somewhat uncertain for a while to come.

Main image: Boris Johnson and Narendra Modi in New Delhi on January 18, 2017. © Government of India, licensed under the Government Open Data License – India (GODL) under the ID 98073 and CNR 92702.

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