UK and South Korea strike trade deal

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The United Kingdom and South Korea have officially agreed on a new trade deal, which the UK government anticipates will generate thousands of jobs and infuse billions into the British economy. This agreement extends tariff-free trade for the majority of goods and services between the two countries, benefitting key British sectors such as pharmaceuticals, automotive manufacturing, alcohol, and financial services. It marks the fourth trade deal negotiated by the current Labour government, following agreements with the EU, the US, and India, although previous deals have yet to produce significant effects on the UK economy.

The announcement was made at Samsung’s flagship store in London by Trade Minister Chris Bryant and his South Korean counterpart, Yeo Han-koo. The new agreement preserves tariff-free status on 98% of trade between the two nations, maintaining the terms that matched the EU-South Korea trade arrangement and were temporarily upheld after Brexit. With the existing deal set to expire in January 2026, the new pact safeguards £2 billion worth of UK exports from tariff hikes. Prime Minister Keir Starmer hailed the deal as “a huge win for British business,” emphasizing its role in facilitating easier trade, supporting jobs, and fostering nationwide economic growth. Bryant reinforced these sentiments by highlighting the deal’s role in offering “cast-iron protections to our key industries,” accelerating economic progress under the government’s “Plan for Change.”

South Korea currently ranks as the 25th largest trading partner of the UK, accounting for 0.8% of the UK’s total trade in the twelve months ending June 2023. However, recent official data indicates a decline in trade volumes, with UK exports to South Korea dropping by 16.4% and South Korean exports to the UK decreasing by 10.8%. Addressing concerns about the dip, South Korea’s trade minister, Yeo Han-koo, emphasized the complementary nature of the two economies and dismissed the decline as not reflective of diminished importance in their relationship. Han-koo explained that the agreement’s primary aim is to reduce non-tariff barriers, making regulations around product origins more business-friendly and introducing new protections for digital trade and investment. He further noted that Britain’s position can serve as a strategic gateway for South Korea into Europe, while South Korea can offer British companies access to Asian markets.

This accord with South Korea adds to a range of post-Brexit trade agreements struck by the UK government. Despite governmental optimism that these deals will stimulate growth, create jobs, and reduce bureaucracy for small businesses, the Office for Budget Responsibility (OBR), an independent fiscal watchdog, has suggested that such agreements with major partners are unlikely to substantially affect the UK economy by 2030. For instance, the UK’s deal with India, which has faced criticism for potentially disadvantaging British workers, is projected by government assessments to raise the UK’s GDP by a modest 0.11% to 0.14%. Notably, India stands as the UK’s 10th largest trading partner, comprising 2.5% of Britain’s total trade.

The new trade deal has been warmly received by UK companies operating in key sectors. Bentley Motors’ chairman and CEO, Frank-Steffen Walliser, described South Korea as an important market for the luxury vehicle segment and welcomed the agreement’s assurances of uninterrupted market access. Similarly, Diageo’s interim CEO, Nik Jhangiani, highlighted the deal’s potential to meet growing South Korean demand for Guinness, which is produced in Cheshire. Meanwhile, Emily Weaver Roads, interim international director at the Scotch Whisky Association, remarked that the Asia-Pacific region represents Scotch whisky’s largest market by value and expressed optimism that the reduction of trade barriers in South Korea would especially benefit single malt whisky sales

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