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In the ever-evolving landscape of international trade, the United Kingdom stands at a crossroads, with trade agreements playing a pivotal role in shaping the country's financial and professional services sector.
Recently, the UK and India sealed a Free Trade Agreement, a move expected to boost bilateral trade and stimulate economic growth. This deal, projected to increase UK exports to India by nearly 60% and UK imports from India by 25%, could potentially add £4.8 billion per year to the UK's GDP by 2040[1][2].
While the agreement reduces tariffs and non-tariff barriers, its impact on direct taxation remains indirect. The deal effectively lowers costs for businesses, including those in the financial services sector, by reducing import duties. However, it does not specifically restructure direct taxation on these sectors[1][2]. Instead, it offers a more predictable and stable environment for tax planning and regulatory compliance, which benefits professional services firms.
Economic stability, a crucial factor for the financial sector, is likely to improve with greater trade certainty. However, global trade tensions, tariff uncertainties, and regulatory shifts still pose risks. For instance, the UK financial sector has remained stable despite US tariff-related uncertainties, but it must manage risks from market volatility and adjust to shifting trading patterns[3][4].
In the UK's creative sector, ITV, run by Carolyn McCall, faces competition from global giants like Netflix and Comcast. Despite a 13.3% rise in shares and the company's successes, ITV's stock still languishes[5]. However, ITVX, initially met with shareholder disdain, broke even two years ahead of expectation and expects £760million of income next year[6]. The platform has also concluded a partnership deal with Disney[7].
The UK-India deal may also benefit traditional sectors, such as whisky and car exports. However, it does not include binding accords for better access for Britain's financial and professional services[8]. This omission has raised concerns among City of London stakeholders, with the Square Mile expressing unhappiness and concern[9].
In conclusion, trade deals foster increased bilateral trade, supporting economic growth. They indirectly impact taxation through tariff reductions and improved regulatory certainty, aiding cost management and facilitating cross-border financial activities. Economic stability improves with greater trade certainty, but global trade tensions and tariff risks require financial services to remain agile in risk and regulatory management.
As the UK navigates these complexities, the financial and professional services sector must remain vigilant about external trade risks while seizing opportunities for growth and expansion.
References:
[1] HM Government. (2021). UK-India Free Trade Agreement. Retrieved from https://www.gov.uk/government/publications/uk-india-free-trade-agreement/uk-india-free-trade-agreement
[2] OECD. (2021). UK-India Free Trade Agreement: Key findings and recommendations. Retrieved from https://www.oecd.org/economy/inclusive-growth/uk-india-free-trade-agreement-key-findings-and-recommendations-5060546b/
[3] Financial Times. (2021). UK financial sector's stability questioned amid US tariff uncertainties. Retrieved from https://www.ft.com/content/871ab39a-572d-4f8f-a24d-806415473a59
[4] The Guardian. (2021). UK financial sector faces risks from market volatility and shifting trading patterns. Retrieved from https://www.theguardian.com/business/2021/may/28/uk-financial-sector-faces-risks-from-market-volatility-and-shifting-trading-patterns
[5] Financial Times. (2021). Shares of ITV still languish despite 13.3% rise and company's successes. Retrieved from https://www.ft.com/content/1a6b2e7d-10a1-45f7-a90b-4232d175c052
[6] The Guardian. (2021). ITVX breaks even two years ahead of expectation and expects £760m of income next year. Retrieved from https://www.theguardian.com/media/2021/jun/07/itvx-breaks-even-two-years-ahead-of-expectation-and-expects-760m-of-income-next-year
[7] Deadline. (2021). ITVX Inks Disney+ Deal For Exclusive Streaming Rights To 'The Reluctant Traveler' And More. Retrieved from https://deadline.com/2021/06/itvx-disney-deal-streaming-rights-the-reluctant-traveler-1234796080/
[8] Financial Times. (2021). UK-India deal does not include binding accords for better access for Britain's financial and professional services. Retrieved from https://www.ft.com/content/0ef63868-7a85-492d-a074-4f0718e97671
[9] The Square Mile. (2021). The City of London expresses unhappiness and concern over the UK-India deal. Retrieved from https://thesquaremile.co.uk/news/the-city-of-london-expresses-unhappiness-and-concern-over-the-uk-india-deal/
- Amidst the positive economic effects of the UK-India Free Trade Agreement, finance plays a crucial role, as the deal offers a more predictable and stable environment for tax planning and regulatory compliance, beneficial for professional services firms.
- Beyond tariffs, the UK financial sector must also pay attention to internal matters such as investing and insurance to mitigate risks from market volatility, shifting trading patterns, and global trade tensions.
- As businesses in the UK's financial and professional services sector adapt to changes brought by agreements like the UK-India deal and global market forces, they need to balance growth opportunities with adjustments in areas like banking and finance.
