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UK joins £12trn Trans-Pacific trade bloc

Author: ICAEW Insights

Published: 17 Jul 2023

The UK is the first European country to join the CPTPP trade group, as government data reveals potential trade benefits and investment prospects including zero tariffs on exports to member countries.

The UK has taken a step towards strengthening its global trade connections by joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Business and Trade Secretary Kemi Badenoch formally signed a treaty in Auckland, New Zealand, on Sunday that solidified the UK’s accession to the trade bloc.

As the first European member and the first new member since its creation, the trade deal spans 12 economies across Asia, the Pacific – and now Europe. The UK’s inclusion in the CPTPP will elevate the trade bloc’s combined GDP to £12trn, accounting for 15% of global GDP.

Being part of the CPTPP will grant UK businesses access to zero tariffs on more than 99% of current UK goods exports to CPTPP countries. This will have significant benefits for goods such as British whisky and industries including the automotive sector. Dairy farmers will also experience reduced tariffs on cheese and butter exports to Canada, Chile, Japan and Mexico, building upon the £23.9m worth of dairy products exported to these countries in 2022.

Commenting on the deal, Badenoch said: “I’m delighted to sign a deal that will be a big boost for British businesses and deliver billions of pounds in additional trade, as well as open up huge opportunities and unparalleled access to a market of more than 500 million people.

“We are using our status as an independent trading nation to join an exciting, growing, forward-looking trade bloc, which will help grow the UK economy and build on the hundreds of thousands of jobs CPTPP-owned businesses already support up and down the country,” she said.

ICAEW CEO Michael Izza welcomed the deal, highlighting that auditing and accounting services are already among the UK’s top exports to CPTPP: “This deal will further strengthen ties with some of the fastest-growing markets in the world, as well as open up new opportunities for growth as firms benefit from certainty on terms of trade and enhanced market access.

“Successfully navigating overseas markets can prove challenging, so the role of chartered accountants in advising and enabling British businesses will also be vital in ensuring this agreement is a success.” 

According to a recent government report, CPTPP-owned businesses employed one in every 100 UK workers in 2019, amounting to over 400,000 jobs nationwide. 

Membership in the trade group is expected to further accelerate investment in the UK by CPTPP countries, which was already valued at £182bn in 2021, by providing investor protections.

Trade benefits and investment prospects

The report shows CPTPP investment accounts for more than £240bn in turnover in London, £35bn in the South East, and £18bn in the East of England. Furthermore, it reveals that 26,000 jobs were created in 2021 and 2022, with 75% of all employment in CPTPP-owned businesses located outside of London. Notably, one in 50 jobs in the North East and one in every 25 jobs in the manufacturing sector are associated with CPTPP membership.

The report also highlights the significant contribution of CPTPP companies to the UK economy. Although they represent only 0.3% of all businesses in the country, they generate 6.1% of the UK’s total turnover.

UK business leader reaction

Industry leaders have expressed their optimism about the UK joining the CPTPP. Ian Stuart, CEO at HSBC UK, says: “The UK’s formal accession to CPTPP marks a significant milestone for UK trade, enabling ambitious British businesses to connect with the world's most exciting growth markets for start-ups, innovation, and technology."

Meanwhile, Catherine White, Head of International at soft drinks producer Belvoir Farm, says the trade agreement “will also ease administrative and commercial trade barriers to allow talented and passionate UK producers to tell their story on a worldwide scale. At Belvoir Farm, we export 20% of our turnover to markets across the globe, with one third of exports bound for Indo-Pacific markets, including Australia, New Zealand, Japan and Singapore.” 

The agreement is expected to come into force next year.

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