The following article comes from Mythily Katsaris (main picture), partner and head of India desk, Fladgate LLP, and Tamal Mandal (picture below), partner – dispute resolution, international trade and investment, Luthra and Luthra Law Offices India. They explore the links between the UK and India and their relevance today, particularly at a time when both countries are positioning to account for new realities. The editors are pleased to share these views and invite replies. The usual editorial disclaimers apply to opinions of outside contributors. To respond and continue the conversation, email tom.burroughes@wealthbriefing.com

While the jury may still be out on the measured effects of Brexit on the UK economy, it is no secret that in the past few years, the UK has witnessed an exodus of high net worth individuals. In 2022, around 1,400 HNW individuals departed the UK shores according to a report by Henley & Partners, a citizenship advisory firm. Adding to that, earlier in the year, an external member of the Bank of England commented that inbound investment had “stopped in its tracks” following the Brexit vote. 

However, not all seems lost as the others’ losses appear to be India’s gain. India prime minister Narenda Modi and former UK PM Boris Johnson’s vision in May 2021 to commit to an Enhanced Trade Partnership, with the aim of doubling trade between the fifth (India) and sixth (the UK) largest economies by 2030, was boosted with the start of the free trade agreement negotiations in January 2022 on “a priority basis.”

India and the UK share a modern partnership bound by strong historical ties. The launch of the negotiations led to Indian companies making a “significant contribution” to the UK economy. The “India meets Britain Tracker” published by Grant Thornton and the Confederation of Indian Industry (CII) identifies more than 30 fastest growing “Indian-owned corporates with operations headquartered or with a significant base in the UK, with turnover of more than £5 million ($6.12 million), year-on-year revenue growth of at least 10 per cent and a minimum two-year track record in the UK.” 

A recent factsheet published by the erstwhile Department for International Trade (now the Department for Business and Trade) reveals that in 2021, there was an uptick in the inward foreign direct investment (FDI) in the UK from India which amounted to £9.3 billion. The “India meets Britain Tracker” shows that there were 900 Indian companies operating in the UK in 2022 with a total turnover of £54.4 billion and employing 141,005 people compared with 850 with a total turnover of £50.8 billion and employing 116,046 people in 2021.

On the goods side, the numbers tell the same story with India being the UK’s 12th largest trading partner accounting for 2.1 per cent of total UK trade. The total UK imports from India amounted to £19.2 billion in the four quarters to the end of Q3 2022 which was an increase of 37.3 per cent or £5.2 billion compared with the four quarters to the end of Q3 2021 as per the DIT’s factsheet. 

Immigration to the UK by wealthy Indians has been on a steady increase. Indian businesses still consider the solid rule of law, relative political stability, ease of doing business and a 1.5 million strong diaspora as an asset and continue to view the UK as a preferred trade and investment destination. With India on course to become the world’s third largest economy by 2030, the country is in a position to drive global economic growth over the coming decade. This will increase the large number of Indian HNW individuals and ultra-HNW individuals that will seek to diversify their portfolios of assets and industries internationally. 

The pandemic has been a big driver of what was an ongoing trend of wealthy Indians seeking to “globalise their lives and assets;” Indians have a natural affinity with the UK and a growing appetite for British assets. 

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There are strong growth opportunities for niche Indian businesses in the UK, and Indian companies will consider exploiting the relatively weak pound. The current economic conditions in the UK will drive UK companies to leverage the size and nature of the resources available in the world’s fifth-largest economy by gross domestic product or the third-largest by purchasing power parity and look to Indian investors and corporates to facilitate expansion. 

Although the ambitious target of concluding the FTA by the end of 2022 could not be met, negotiations remain a high priority for both countries with PM Modi meeting UK PM Sunak on the sidelines of the G20 Summit in Bali in November 2022. As things stand, the seventh round of negotiations led by the DIT Secretary of State, Kemi Badenoch concluded recently this February. The eighth round of talks – currently taking place – are following closely on the heels of India seeking to open its legal market in a limited manner. 

First-mover advantage
The UK stands to benefit from the first-mover advantage amongst the developed economies (barring Australia) by quickly securing the FTA with India. This will see the reduction in barriers to trade in goods by lowering duties, increasing opportunities for services and investment to and from both countries, creating opportunities for businesses especially small- and medium-sized enterprises and supporting innovation and trade in the digital era amongst other things.

In the meantime, while the governments of the two countries chart out the path to conclude the FTA and boost trade and investment, Indian businesses continue to keep faith in the UK. Even during the Covid pandemic when inward FDI into the UK dropped, Indian businesses accounted for “99 FDI projects over the period, second only to the United States in terms of project numbers.” 

As the UK and India create a free-trade agreement and the value of such cross-border deals and expansion becomes more widely understood, a greater volume of deals in the longer term is expected.

It is thus safe to say that, riding on the back of the bonds that stretch for over three centuries between the two countries, Brexit or no-Brexit, pandemic or no-pandemic, Indians and their businesses’ love affair with the UK continues unabated and unhindered.