Tax Agreements Provides Manufacturing Sector with over £1 Billion

New Tax Agreements To Provide Manufacturing Sector with Over £1 Billion Annual Growth. 

The UK recently concluded a significant tax agreement with Peru and ratified its accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), marking pivotal steps in bolstering international trade relations. This double taxation agreement with Peru aims to eliminate the financial burden of dual taxation, thereby significantly reducing operational costs and providing greater certainty for businesses operating between the two nations.

The newly established tax treaty with Peru will offer substantial advantages to UK manufacturers. By preventing businesses from being taxed twice on the same income, the agreement facilitates smoother financial planning and resource allocation, enhancing the competitiveness of UK firms in the Peruvian market. 

Additionally, the reduction in trade barriers and operational costs is expected to spur an increase in bilateral trade and investment, which already stands at £1.8 billion as of 2023, offering UK manufacturers new opportunities for expansion and collaboration in Peru.

In conjunction with the tax agreement, the UK has ratified its terms of accession to the CPTPP. This expansive trade bloc, comprising 11 countries across Asia and the Pacific, including Japan, Malaysia, and Canada, collectively represents 15% of global GDP. For UK manufacturers, this development translates to more than 99% of UK goods exports to CPTPP countries becoming eligible for tariff-free trade.

Joining the CPTPP is anticipated to provide UK manufacturers with enhanced market access, reduced tariffs, and streamlined regulatory environments across member countries. The agreement encompasses modern ‘rules of origin’ provisions, which offer greater flexibility for UK goods and services, facilitating easier integration into complex supply chains spanning multiple nations.

The impact of the signing of the CPTPP is expected to be massive. According to the Minister of Trade Policy, Greg Hands, it is estimated that the manufacturing sector will grow in gross value added (GVA) by around £250 million relative to 2021 levels as a result of the CPTPP deal.  The value of exported goods to CPTPP countries which stood at £4.1 billion in 2023 will also increase significantly with estimates indicating an over £1 billion increase in the long run. The automotive sector in particular will benefit from the deal with exports potentially increasing by £712 million long-term, driven by a liberalisation of tariffs and non-tariff measures. 

The CPTPP ratification also positions the UK as a strategic partner in shaping the future of global trade regulations. This influence is crucial for adapting trade policies that support the evolving needs of UK manufacturers. The membership in the CPTPP is expected to create robust supply chains across Southeast Asia and the Americas, providing resilience against global economic uncertainties and enhancing the UK's geopolitical influence in the region.

In addition to these agreements, the UK has also been actively pursuing other trade deals aimed at benefiting its manufacturing sector. Notably, recent agreements with New Zealand and Australia are set to provide UK businesses with further opportunities. 

For instance, the free trade agreement with Australia, which came into effect in 2023, eliminates tariffs on all UK exports to Australia, promoting greater trade volumes. It also makes the rules of origin flexible allowing UK businesses to use some imported parts and still qualify for 0% tariffs when exporting to Australia. This agreement will benefit the manufacturing industry significantly which employs over 3.4 million people.

Similarly, ongoing negotiations with India are expected to culminate in a comprehensive free trade agreement, offering UK manufacturers enhanced access to one of the world’s largest and fastest-growing markets.

These strategic trade agreements reflect the UK’s commitment to expanding its global trade footprint and supporting the growth of its manufacturing sector.  In the long run, these agreements will reduce trade barriers and foster international collaborations, ensuring that UK manufacturers remain competitive on the global stage.