The UK and South Korea have recently finalized a significant trade agreement, marking a pivotal moment in their economic relationship. This deal, hailed as a 'huge win for British business' by Prime Minister Keir Starmer, promises to create thousands of jobs and inject billions into the British economy. The agreement extends the current tariff-free trade on most goods and services, benefiting various British industries, including pharmaceuticals, car manufacturing, alcohol, and financial services.
The deal is particularly notable as it comes amidst a series of post-Brexit trade agreements. While previous deals with the EU, US, and India have had minimal economic impact, this agreement with South Korea is expected to be different. South Korean culture, including music, cosmetics, and food, has gained immense popularity in the UK in recent years, further emphasizing the potential for economic growth.
Trade Minister Chris Bryant and his South Korean counterpart, Yeo Han-koo, announced the deal in a symbolic setting at Samsung's flagship store in London. The agreement ensures that 98% of trade will remain tariff-free, mirroring the terms the UK had with the EU before Brexit. This extension is crucial, as the previous UK-South Korea trade agreement was set to expire in January 2026.
The new deal safeguards £2 billion of UK exports from tariff increases, providing a boost to British industries. South Korea is the UK's 25th largest trading partner, contributing 0.8% of the UK's total trade in the 12 months ending June. However, UK exports to South Korea have seen a 16.4% decline, and South Korean exports to the UK have fallen by 10.8% over the same period. Despite these figures, South Korea's trade minister assured that the economies of both nations remain complementary.
The agreement focuses on reducing non-tariff barriers, such as streamlining product origin rules and establishing new digital and investment protections. This approach aims to foster closer economic cooperation and mutual benefits. South Korea's trade minister also highlighted the potential for Britain to serve as a gateway for South Korean trade with Europe, while South Korea can act as a gateway to Asia for British companies.
While the deal is welcomed by British companies like Bentley Motors, Jaguar Land Rover, and Diageo, it has faced criticism for potentially undercutting British workers, similar to the UK-India free trade agreement. The OBR, an independent budget forecaster, has deemed such deals with larger partners unlikely to significantly impact the UK economy by 2030. However, the government remains optimistic, asserting that these trade agreements will stimulate economic growth through job creation and reduced red tape for small businesses.
