India–UK FTA: Competitive prices, assured market access for textiles

Industry analysts, including Fibre2Fashion, view this as a turning point that will not only enhance India’s access to a mature market like the UK but also rekindle investment and growth in the country’s largest employment-generating sectors, especially at a time when rising tariffs in the US are narrowing opportunities in other major markets.

Indian textiles: Quality with cost-effectiveness

Table 1: Apparel export values ($ mn) to the UK and per-ton prices, 2024

Source: TexPro
*Projected average price per ton under FTA: $21,421

Figure 1

Source: F2F Analysis

*Please note that the 2025 value is projected based on the assumption that the agreement will be implemented by the end of CY 2025.

India’s position in the UK apparel market has long been distinct from ultra-low-cost competitors such as Bangladesh and Cambodia. While Bangladesh primarily exports basic, low-cost garments (e.g., T-shirts, bulk knitwear) with the lowest average prices, Indian apparel reflects a more diverse and higher-value product mix, including embellished fashionwear and specialty textiles, justifying a moderately higher price point.

In 2022, India’s average export price to the UK was approximately $25,125 per metric ton, higher than China’s ~$24,285/ton and significantly above Bangladesh’s $17,844/ton, driven by high-end and fast-turnaround fashion, while Vietnam’s focus on premium segments positioned its prices near China’s level. Cambodia’s pricing mirrored Bangladesh’s, reflecting its role in basic cut-make-trim manufacturing.

India’s mid-range pricing means it has traditionally competed not on being the cheapest supplier but by offering quality, product diversity, and value addition. Notably, India’s market share in UK apparel rose from about 5 per cent to 6 per cent by 2023, even before any tariff concessions. The FTA builds on this momentum, creating an opportunity for India to dramatically enhance its cost competitiveness and expand its UK footprint. With the FTA coming to effect by the end of 2025, the average cost of apparel is expected to go down to $21421.

Tariff Elimination: A Game-Changer for Indian Apparel

The FTA will eliminate the 9.5–10 per cent import tariffs that previously applied to most Indian apparel entering the UK. This duty removal instantly reduces landed costs by around 10 per cent, significantly improving India’s cost competitiveness. Indian exporters can leverage this advantage in two ways:

1. Lower prices for UK buyers to boost competitiveness and capture market share
2. Retain margins to reinvest and expand capacity, or a combination of both

For example, a cotton shirt that previously cost a UK buyer £5 (~$6.58, including tariffs) could now retail for approximately £4.50 post-FTA — a tangible saving. This is especially beneficial for India’s numerous small and medium-sized apparel manufacturers, who often operate on thin margins; duty-free access enhances their viability in a highly price-sensitive market.

India’s mid-range price position means it has not been the cheapest supplier, but has competed on quality, diversity, and value addition. Despite this, India managed to grow its UK presence in recent years, with its market share rising from about 5 per cent to 6 per cent by 2023, even before any tariff relief. This momentum, combined with the FTA’s removal of duties, sets the stage for India to substantially improve its cost competitiveness and expand its share in the UK apparel market.

Crucially, the FTA levels the playing field for India against several competitors who already had duty-free access to the UK. Before this deal, India was at a tariff disadvantage relative to:

Bangladesh and Cambodia: Both least-developed countries have enjoyed zero-duty access to the UK under its Generalised Scheme of Preferences (now the Developing Countries Trading Scheme). Bangladesh, the UK’s second-largest supplier, faced no tariffs on apparel (under ‘Everything But Arms’ preferences), allowing it to undercut India on price. Cambodia likewise exports duty-free. India will now match these countries on tariff treatment, closing the ~10 per cent cost gap that existed purely because of duties. This is expected to substantially narrow the price gap between India and Bangladesh — previously, Bangladesh’s goods were about 27 per cent cheaper per unit than India’s, but with tariffs gone, Indian products could effectively cost only ~15–17 per cent more on average (before any further adjustments). India can now compete more aggressively on basics where Bangladesh and Cambodia dominate, leveraging its scale and raw material base without a tax penalty.

Turkiye: Turkiye has had an FTA with the UK (continuing its former customs union access), meaning Turkish apparel enters duty-free. Indian exports until now incurred ~10 per cent duty, making them relatively more expensive than Turkish goods, despite Turkiye’s higher labour costs. With the FTA, India and Turkiye are on equal footing tariff-wise. Given India’s lower manufacturing costs, Indian apparel will now have a clear price edge over Turkiye for similar products. This could encourage UK buyers to shift orders for cost-sensitive items from Turkiye to India, especially for high-volume staples.

Turkiye will likely remain at an advantage in speed-to-market for ultra-fast fashion, but for many categories, India’s newfound duty advantage tilts the scales on cost.

Vietnam, Sri Lanka, Pakistan: These countries have either FTAs or enhanced trade preferences with the UK. Vietnam, for instance, has an FTA (the UK-Vietnam FTA, mirroring the EU-Vietnam FTA) phasing out tariffs—many Vietnamese apparel exports already enjoy reduced or zero tariffs. Sri Lanka and Pakistan benefit from preferential access (GSP+) with zero or minimal duties. India currently pays higher duties than all of these competitors but will join the duty-free club as soon as the FTA comes into effect, eliminating a key advantage that Vietnam, Sri Lanka, and Pakistan hold. Even if Vietnam’s tariffs are not fully zero yet, India will immediately jump to 0 per cent, arguably giving it a short-term edge until Vietnam’s tariffs are completely phased out. Overall, post-FTA, India will have parity or better on tariff costs versus every major competitor except China.

China: Notably, China (the UK’s largest supplier) does not have any trade agreement or special preference with the UK, so Chinese apparel continues to face standard import tariffs (around 12 per cent MFN duty) in the UK. This is a pivotal change: India will gain a 10–12 per cent tariff advantage over Chinese goods in the UK market. Even though Chinese manufacturers are highly efficient, this duty differential is significant in a low-margin industry. For UK importers and retailers, sourcing from India will become ~10 per cent cheaper (in duty terms) post FTA, compared to sourcing the same product from China. This undercuts China’s pricing and positions India as a very attractive alternative for diversified sourcing (China+1 strategy). Given that India’s average unit value is currently only ~7 per cent higher than China’s, a 10 per cent tariff removal will more than offset that gap. Thus, Indian apparel can either be priced slightly below Chinese apparel, all else equal. This dynamic is expected to help India chip away at China’s UK market share in price-sensitive categories, as UK buyers seek to reduce over-reliance on China.

A stronger competitive position

The removal of tariffs will eliminate a longstanding cost handicap for Indian apparel exporters. With duty-free access and a diverse, quality-focused product mix, India will be able to compete head-to-head on pricing with Bangladesh, Vietnam, Turkiye, and others in the UK.

An internal industry analysis suggests that this ~10 per cent cost advantage will drive both price reductions and margin improvements. Combined with India’s extensive raw material base (cotton and fabrics), skilled workforce, and vertically integrated manufacturing capabilities, Indian exporters are well positioned to meet surging demand from UK brands and retailers seeking cost-effective, diversified suppliers.

Early forecasts already predict a sharp rise in UK orders for Indian garments and home textiles over the next 1–2 years. Indian industry groups have hailed the agreement as a ‘game changer’ that unlocks a new era of growth for apparel exports.

Fibre2Fashion News Desk (NS)