The United Kingdom and Switzerland announced in May 2023 they were going to embark on negotiations for a new free trade agreement (FTA), aiming to strengthen their economic ties and update their trading relationship for the modern age. Given at the end of 2022, Switzerland ranked as the UK’s 7th largest export partner, accounting for 4.5% of all of the UK’s goods exports. In return the UK imports £10.7 billion worth of Swiss goods. It is a trade relationship which warrants a clearly considered and optimised agreement to best support businesses in both countries.
Renegotiating the free trade agreement promises great benefits for those importing or exporting goods across this trade lane, as it can be expected to review or remove market access barriers and enhance cooperation. Switzerland was the 20th largest world economy in 2022, and their demand for imports is expected to grow in real terms by 78% by 2050; therefore, an agreement to lower tariffs would be of distinct benefit to UK businesses, potentially resulting in annual duty reductions of approximately £7.4 million.
Nevertheless, a free trade deal does already exist, so trading between these two countries is already supported with formal protocols and happens under favourable conditions. However, a fresh look at the agreement will almost certainly make the circumstances even more beneficial, so businesses should keep a close eye on what comes to fruition from the negotiations.
One group in particular might be watching the developments with interest, the 14,000 UK businesses, mostly (86%) small and medium-sized enterprises (SMEs), who currently export goods to Switzerland. A simplification to the trade rules, customs procedures or any level of digitisation measures would offer these smaller businesses a much more level playing field to compete on an international stage, allowing them to benefit immensely from stronger levels of foreign trade.
“It's no doubt the UK and Switzerland already have a very strong trade relationship, which benefits businesses in both countries. The upcoming renegotiations will only strengthen this foundation, and any simplifications to customs procedures will be especially helpful for smaller UK businesses who may not have considered Switzerland as a viable export market before."
- - - David Cowell, Customer Success Manager at WTA Group.
With Switzerland being the UK's 10th largest trading partner, the new deal holds significant potential for both countries, and offers the chance to address some of the limitations of the existing FTA, such as the service sector which is not covered currently. Both the UK and Switzerland boast robust service economies, even considered service superpowers, so the new FTA will clearly need to address the crucial role which the service sector plays in their trade relationship.
The launch of negotiations with Switzerland comes at a time when the UK's services sector is experiencing significant growth. In 2022, the UK achieved record-high service exports worth £397 billion, showing a 20% increase compared to the previous year. The inclusion of services in the agreement would facilitate the delivery of services electronically, which accounted for nearly 69% of the UK's services exports to Switzerland in 2020.
“As two of the world’s leading service economies, there’s a huge prize on offer to both the UK and Switzerland by updating our trading relationship to reflect the strength of our companies working in areas ranging from finance and legal, to accountancy and architecture.
The UK and Switzerland are natural trading partners and today’s launch will play to our strengths as services superpowers, while also boosting investment in emerging technologies, data innovation, and digital trade.”
- - - Business and Trade Secretary, Kemi Badenoch
Paving the Way for Future Trading Relationships
In a post-Brexit environment, the UK has been looking to either re-negotiate existing deals or establish new agreements, so the negotiations with Switzerland are not out of the ordinary. However, these negotiations for a new free trade agreement between the UK and Switzerland have far-reaching implications beyond their bilateral trade. By setting a new paradigm for services trade, including mutual recognition agreements in financial services, and addressing cross-cutting issues, the agreement could serve as a template for the UK's future trading relationships with nations where there is also a strong service economy. Creating the opportunities to establish world-leading standards, particularly in sectors like life sciences, would foster great innovation and technological advancements, benefitting citizens and businesses alike across the world.
As negotiations progress, it will be interesting to see how the UK and Switzerland collaborate to shape a trade agreement that reflects the dynamics of the modern global economy.
Looking to develop your trade with Switzerland?
WTA Group run our own dedicated consol services between the UK and Switzerland every week. So if you are looking to ship to Switzerland (or perhaps you already do) but don't have enough to fill a full trailer, these could solve your logistical headaches.
Get in touch with our team today to learn more about how these consol services could help maximise your trade opportunities with the UK's 7th largest goods export partner.
David Cowell, Customer Success Manager
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