You wait three years for a trade deal and then two come along at once.
As of Monday, the UK hadn’t announced a free trade agreement since 2022, when Boris Johnson’s government signed one with New Zealand, ranked number 52 among global economies.
By the end of a week foreshortened by the bank holiday and which began with Donald Trump dropping a tariff bombshell on the British film industry, the government had unveiled a deal with India, as well as a more nebulous framework deal with the US, the fourth-largest and largest economies, respectively.
Sandwiched in between the two announcements was an interest rate cut from the Bank of England, making it cheaper for UK businesses to borrow money to invest in the growth that the Labour government is so desperately chasing.
Looking forward, opponents of tariff barriers are now crossing their fingers for a thawing of relations between the US and China, which would avert broader ripple effects depressing UK growth.
The US deal also appears to have left the way clear for Starmer to seek stronger economic ties with the EU, another potential lever to boost economic output.
Speaking on Thursday, after staging a transatlantic conference call with Trump, the prime minister hailed a “fantastic, historic day”.
But have the events of this week really moved the dial for UK plc and the prospects for Britain’s lacklustre economic growth?
David Henig, director of UK trade policy at the thinktank European Centre for International Political Economy, was a little more circumspect.
“It’s middling,” he said, referring to the combined effect of the week’s trade announcements. “None of this is economically transformational but was anything you could have done ever going to be?”
“It’s very Starmerish. It’s 1-0 to the Arsenal.”
Henig’s assessment, via a footballing analogy, is typical of the broader reaction from economists and businesses: positive but muted.
The impact on growth is “likely to be very small”, said Ben Caswell, senior economist at the National Institute of Economic and Social Research, but should fuel business confidence.
The FTSE 100 offers one bellwether of the mood among those with money riding on it.
The Trump-Starmer announcement took place on Thursday as trading on the London market was nearing a close, giving investors relatively little time to digest it.
There were some obvious winners straight away.
Shares in luxury carmakerAston Martin soared as Trump confirmed that the tariff on UK vehicles, which was scheduled to rise to 27.5%, would instead be set at 10%.
That is also a fillip for the UK’s biggest car exporter, Jaguar Land Rover (JLR), whose Solihull plant was apparently chosen as the venue for Starmer’s press conference for that very reason.
In an interview with CNN on Thursday, the UK ambassador to the US, Peter Mandelson, suggested the deal had persuaded JLR to change its mind about planned lay-offs.
“This deal has saved those jobs,” he said. “That’s a pretty big achievement, in my view, and I’m very pleased that the president has signed it.”
The Society of Motor Manufacturers and Traders hailed the dissipation of a “severe and immediate threat”.
However, tariffs on UK cars will still be four times the 2.5% they were before Trump’s “liberation day” tariff frenzy, while the lower rate will only apply to the first 100,000 exports, effectively capping the flow of British marques into America at just below the 102,000 level achieved last year.
Rolls-Royce was another obvious beneficiary after UK negotiators secured an exemption for its engines, used on Boeing 787 passenger jets.
The fragile British steel industry also appears likely to benefit from a cooperation agreement, although details are sketchy at present. Trump also signalled preferential treatment for the UK’s pharmaceutical industry, which exports £8.8bn a year to the US.
https://www.theguardian.com/business/2025/may/09/aesc-second-sunderland-gigafactory-after-securing-funding-government-battery-maker
On Friday morning, after investors had slept on it, firms with a US presence continued to make gains.
“The FTSE 100 top risers’ list was full of UK-listed stocks that do business in the US, such as retailer JD Sports, rat catcher Rentokil and industrial groups Smiths [Group] and Spirax,” said Russ Mould, investment director at stockbroker AJ Bell.
However, more than 280 UK-listed companies have so far issued warnings about the impact of tariffs, according to investment firm Bowmore Wealth Group.
Most of those are still facing up to the reality of a 10% tariff on exports to the US that didn’t exist just six months ago, or the collateral damage from the wider continuing trade war.
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Of the two agreements with India and the US, only the former is a full trade deal at this stage.
Anna Leach, chief economist at the Institute of Directors, said: “The potential from India’s growing demand for consumer goods and services is huge.”
Henig thinks the agreement with India, which ministers said could add £4.8bn to the UK economy by 2040, offers the more reliable boost, albeit a “slow burn”.
“It’s a hope in the future that you can build on what’s there. The US deal is stemming the damage of something that was going to happen.”
The stock market also offered insight into potential beneficiaries of improved relations with New Delhi.
With tariffs on whisky and gin scheduled to be slashed, spirit-maker Diageo climbed by 1.8% after the India deal was announced, while the Scotch Whisky Association hailed a “transformation” agreement that it said offered the chance to increase whisky exports to India by £1bn over the next five years, creating 1,200 jobs.
But the trade body grew a little more sober with every passing minute of the US-UK press conference, as Scotch, which accounts for 2% of UK exports to the US, failed to garner a mention.
While the twin trade agreements offered some respite to the turmoil ushered in by Trump’s penchant for tariffs, the pervading atmosphere of uncertainty remains.
On Thursday, after a run of disappointing economic data that has only darkened the mood, the Bank of England intervened in an effort to lift the gloom.
Its policymakers have cut interest rates by a quarter point to 4.25% to cushion the UK economy against the impact of rising economic uncertainty.
Having already cut forecasts, they warned that the UK economy would slow by a further 0.3% over the next three years and stagnate for the rest of 2025.
There are reasons to be cheerful.
The rate cut heralds cheaper borrowing costs for businesses and homeowners, while falling global oil prices mean lower prices at the pump for motorists.
On the unfolding trade picture, Liam Byrne, chair of the business select committee, said the US agreement “does not compromise our ability to pursue a big, bold reset with the EU” before a summit with the trading bloc, the UK’s biggest trading partner, on 19 May.
The US and China are also heading for trade talks this weekend, with any rapprochement that cools their escalating tariff war likely to have positive knock-on effects for all large economies.
Henig believes the big win from this week is more in the mood music than the nitty-gritty of announcements on beef, steel or cars.
“It’s not in the deals, it’s in attracting inward investment by showing the UK as a good place to do business.
“One of the ways you do that is by showing that you have a government able to do deals.
“All of this is a bit tentative but we were coming from a time of boosterish nonsense saying we’re going to change the world through free trade deals. That was never going to happen.”
Leach called on the government to focus now on policy to complement Starmer’s deal-making, highlighting opportunities such as the spending review, industrial strategy and 10-year infrastructure plans.
“Removing barriers to growth and investment from excessive regulation – particularly via the planning system – is the big opportunity to get the UK on to a firmer platform for growth and prosperity,” she said.
Tina McKenzie, policy chair of the Federation of Small Businesses, said: “Small business confidence may have edged up this quarter, but it’s still stuck in the deep red.
“The chancellor must use the autumn budget to reform business rates, while the small business strategy must finally fix the pervasive issue of late payments.”
