Wishful thinking aside, prospects for a significant shift in the dynamics of Pakistan-UK commercial and economic ties appear remote for now, amid the Iran-US conflict and the risk of a wider war, volatile global markets — particularly energy and logistics — and mounting public discontent as expectations collide with economic realities.
The diplomatic outreach of Prime Minister Shehbaz Sharif’s government, its successful management of sovereign default risks and renewed International Monetary Fund support have helped improve Pakistan’s international image. Yet, in the current global environment, translating that goodwill into deeper market access or greater foreign investment may prove difficult.
The pace of global events, with potentially severe economic ramifications, is such that governments are struggling to anticipate, let alone prepare for, emerging challenges. In this climate, the finer details of bilateral trade and investment relations risked being pushed down the agenda.
In the UK, Prime Minister Andy Burnham, who took office this month, is still focused on consolidating his government while confronting pressing domestic and international challenges. Although Labour governments are generally regarded as more receptive to strengthening Commonwealth ties, Pakistan is unlikely to rank among London’s immediate foreign policy or economic priorities.
The scope of deeper Pak-UK business ties is limited for now
The UK and Pakistan already enjoy fairly stable trade relations. Pakistan’s placement in the ‘Enhanced Preferences’ category under the UK’s Developing Countries Trading Schemes means that, post-Brexit, around 92 per cent of its product lines continued to enjoy tariff- free access to the UK market, broadly preserving the preferential treatment available under the EU’s GSP Plus Scheme.
Earlier this month, Commerce Minister Jam Kamal Khan and British High Commissioner Jane Marriott reportedly discussed upgrading the bilateral trade dialogue into a structured framework with designated working groups, with particular emphasis on intensifying business-to-business cooperation.
There is a view in official circles that the natural progression of bilateral economic ties should eventually lead to a free trade agreement (FTA). Informed sources in Islamabad, however, believe the process is still at an early stage, with sector-specific engagements in areas such as IT, agriculture and services needing to deepen before formal free trade agreement negotiations can gain traction. They remain hopeful that Pakistan’s growing diplomatic profile and improving economic track record could lend momentum to the process.
Pakistan-UK bilateral trade increased by over 6pc in FY25 to $7.3 billion, up from $5.5bn in 2022, with Pakistan currently enjoying a trade surplus of around $1.5bn. Its major exports to the UK include cotton, textiles, leather products, surgical instruments, cereals, travel goods, handbags, fruits and confectionery, while imports comprise iron and steel, electrical machinery, machinery and mechanical appliances and chemicals.
Pakistan is currently the UK’s 46th-largest trading partner, while the UK ranks among Pakistan’s leading trade partners and its third-largest source of remittances after Saudi Arabia and the UAE.
Discussing the potential benefits of an FTA with the UK, a leading businessman was less than enthusiastic. Citing Pakistan’s experience with FTAs, preferential trade agreements and bilateral investment treaties, particularly with China, Sri Lanka and Malaysia, he argued that such arrangements had often benefitted partners more than Pakistan.
“Trade agreements are not an end in themselves. Their purpose is to improve market access for goods and services and stimulate economic growth. In Pakistan’s case, however, they have often opened the domestic market to foreign producers enjoying lower taxes and production costs, putting local industry at a disadvantage. This has contributed to premature deindustrialisation, with serious consequences for the economy”, he said.
“Negotiating the trade deal is a highly technical exercise that bureaucrats alone may not be equipped to handle. Learning from past mistakes, the government must involve independent trade experts and private sector representatives in negotiations to secure better outcomes,” he stressed.
A former commerce secretary, speaking privately, agreed that the government should broaden its trade negotiating team by bringing experts on board, but cautioned against the indiscriminate inclusion of private-sector representatives.
“The government must do its homework before entering trade talks, but including businessmen is no guarantee of a better deal. In my experience, some tend to treat place on government delegations as an opportunity to advance narrow commercial interests or simply secure a free foreign trip,” he remarked.
Responses from relevant senior members of the government’s economic team were awaited when the report was filed. The Pakistan High Commission in London promised to respond to queries on the subject, but its input was not received by the deadline.
Published in Dawn, The Business and Finance Weekly, August 3rd, 2026