The UK is one of the largest economies in the world and the Office of National Statistics (ONS) revealed that UK total trade was equivalent to 62.8% of UK GDP in 2024.
Since leaving the EU, the UK has signed trade agreements with more than 70 countries and this has created new opportunities for exporters, importers and service providers.
Many businesses are unaware of how a Free Trade Agreement (FTA) can support international growth and could be missing out on a more cost-effective way to sell goods or services across borders.
What is a Free Trade Agreement (FTA)?
An FTA is an international agreement between two or more countries set to reduce or remove trade barriers, such as tariffs or restrictive regulations.
There are several types of FTAs, which include:
- Bilateral agreements – When two countries sign an agreement to reduce trade barriers and improve economic cooperation
- Multilateral agreements – When three or more countries agree on set trade rules and reduce trade barriers between each other
- Economic partnership agreements – These reduce barriers and promote trade and investment between developed and developing countries
- Cooperation agreements – These focus on collaboration in specific sectors, such as research and development
What are the benefits of FTAs for UK businesses?
Since Brexit, the UK has entered many more FTAs that provide greater opportunities for UK importers.
Some of the most notable FTAs include:
- UK-EU Trade and Cooperation Agreement (TCA)
- UK-Japan Comprehensive Economic Partnership Agreement (CEPA)
- UK-Australia Free Trade Agreement
- Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Many recent FTAs include protections for services, investment and intellectual property and provide reassurance when operating overseas.
The reduction or removal of tariffs by FTAs lowers import and export costs and improves profit margins for businesses trading internationally.
They also improve market access and make it easier to trade across borders by reducing regulatory and administrative barriers.
Businesses will be able to diversify supply chains and access a wider range of suppliers and customers as a result.
FTAs can often provide better pricing for consumers and help businesses remain competitive.
Supporting growth is a core part of these agreements as they allow businesses to source high-quality inputs and expand into new markets with confidence.
What businesses should consider before relying on an FTA?
Businesses must understand that expanding their operations into international markets does not come without difficulties.
Before relying on an FTA, you must know how it applies to your business and meet the rules of origin requirements, which determine whether goods qualify for preferential tariffs.
It is important to not only consider goods but also services, as many FTAs include provisions for professional, digital and consultancy services.
Businesses may need to factor in further planning for data protection requirements, visas, local licensing and technology infrastructure when dealing with overseas markets.
Diversifying suppliers may improve compliance with the rules of origin, but businesses must seek financial advice to determine whether it is the best decision for their operations.
Businesses should also consider non-tariff barriers, including product standards, labelling rules, certifications and data regulations.
These can result in timely and costly repercussions if not factored into your expansion strategy early on.
International trade can be volatile and preparing a financial plan is crucial to help protect your business against disruption.
How to make the most out of an FTA?
The UK has a wide range of FTAs, but not all apply to every business and understanding which agreement offers you the best opportunity can be hard.
Businesses must have a clear understanding of tariffs and whether their goods or services meet eligibility requirements.
FTAs can be overwhelming, but our team can help advise you on the best agreement for you and when tariffs will apply.
We can help you remain compliant in your documentation and reporting requirements and ensure your cash flow planning is resilient for international growth.
With the right support, FTAs can be an effective resource to help your business expand internationally.
Contact our team for advice on how to grow your business internationally and how FTA may be effective.