UK–India Synergies in the Emerging Global Order: Investment, Trade, and the Role of SMEs

India is poised to become the world’s third-largest economy by 2027, underpinned by strong demographic fundamentals, rapid digitalisation, and expanding capital markets. The United Kingdom, repositioning itself in the post-Brexit global order, has emerged as a strategic partner for India in trade, investment, and technology collaboration.

The UK and India have an evolving economic relationship, with areas of growth related to small and medium-sized enterprises (SMEs), cross-border mergers and acquisitions (M&A), and the anticipated UK–India Free Trade Agreement (FTA). Indian businesses, particularly in the technology and manufacturing sectors, are increasingly acquiring UK-based SMEs to access brand equity, technological capabilities, and mature market channels. These acquisitions are often followed by successful capital market offerings in India, enabling Indian firms to scale both domestically and internationally.

Legal counsel plays a key role in navigating complex cross-border issues, including restructuring, regulatory compliance, employment law, IP protection, and dispute resolution. As India positions itself as both the back office and factory to the world, and the UK opens its economy to new global partnerships, SMEs in both markets stand to gain significantly from proactive legal and strategic guidance.

Having already surpassed Japan, the Indian economy is expected to overtake Germany in the near term. Concurrently, India’s capital markets are undergoing significant transformation and expansion, with projections indicating it will possess the third-largest stock market by 2030, driven predominantly by robust investments in technology, infrastructure, and energy sectors.

In this changing economic landscape, both India and the United Kingdom are seeking to deepen bilateral commercial ties. With complementary strengths and historical affinity, the two nations are engaging in a convergence of trade, investment, and regulatory alignment, notably through the anticipated UK–India Free Trade Agreement (FTA).

So, what are the opportunities for SMEs, the legal considerations of cross-border transactions, and the strategic role of mergers and acquisitions in facilitating market entry and expansion?

Strategic Appeal of India and the UK as Reciprocal Investment Destinations

Businesses in both markets increasingly view the other as a strategic anchor for international expansion. India offers a combination of scale, demographic advantage, and pro-business reforms. The United Kingdom, conversely, presents Indian companies with access to innovative technology, strong regulatory institutions, and proximity to European and North American markets.

India continues to be a significant consumer base for UK goods and services, while simultaneously emerging as a dynamic source of talent, capital, and technology solutions for British enterprises. Decades of outsourcing, from software development and customer support to business process optimisation, have positioned India as the digital backbone of the global services industry. As remote and distributed work models become more mainstream, India’s strategic advantage in delivering high-quality services at scale is only being reinforced.

Now, with an expanding domestic manufacturing base driven by public investment in infrastructure, policy reforms (such as corporate tax cuts and production-linked incentives), and an ambitious digital transformation programme, India is moving beyond the services narrative. It is positioning itself as a credible global manufacturing hub, potentially the “factory to the world.”

Policy Environment and Infrastructure Support

India’s policy environment is increasingly geared toward facilitating inbound and outbound investments. The government has prioritized initiatives such as:

• Dedicated industrial corridors and logistics hubs.
• Streamlined land acquisition and tax frameworks.
• Liberalisation of foreign direct investment (FDI) norms in key sectors.
• Streamlined regulations for Overseas Investment both as overseas Direct Investment and Portfolio Investments.

Notably, Indian authorities have demonstrated willingness to work with small and medium-sized enterprises (SMEs) from the UK and EU, including offering infrastructure support and access to industrial land to establish manufacturing units. This policy clarity and infrastructure readiness contribute to rising investor confidence in sectors ranging from electronics and pharmaceuticals to textiles and green energy.

The UK–India Free Trade Agreement¹: Focus on Regulatory Coherence and SME Enablement

The proposed UK–India Free Trade Agreement is expected to serve as a major catalyst for bilateral trade and investment. It aims to address many of the structural and regulatory hurdles that have historically impeded cross-border economic engagement.

The agreement’s priorities include:

• Ease of doing business.
• Regulatory compliance harmonisation.
• Mobility of skilled professionals.
• Intellectual property rights enforcement.
• Streamlined dispute resolution mechanisms.

Chapter 4.21 of the FTA is particularly noteworthy, as it addresses the role of small and medium-sized enterprises. This chapter enshrines commitments from both governments to foster SME participation in bilateral trade, including:

• Structured cooperation to reduce trade barriers.
• Transparent access to regulatory and market information.
• Cross-border support frameworks for SME market entry.

For UK-based SMEs, especially in sectors such as advanced manufacturing, green technologies, and consumer goods, these provisions could significantly lower transaction costs and risks associated with entering the Indian market.

Cross-Border M&A: A Strategic Tool for Growth

This model, using mergers and acquisitions (M&A) as a means to rapidly acquire international capabilities, market presence, and brand value; has already proven highly effective in the Indian technology sector.

(i) Indian Software Companies and Global Footprint via M&A

Over the past two decades, Indian IT and software services companies have executed a large number of strategic cross-border acquisitions, particularly in the United States, the United Kingdom, the European Union, and Australia. These acquisitions were not limited to traditional IT outsourcing but were aimed at acquiring:

• Established client bases in regulated sectors such as banking, insurance, and healthcare.
• Specialist platforms and intellectual property, especially in areas like data analytics, AI/ML, cloud services, and cybersecurity.
• Access to onshore delivery capabilities and proximity to client operations, allowing compliance with local regulatory or data localisation requirements.
• Skilled local teams, including leadership, client account managers, and sector-specific domain experts.

Examples include:

• Infosys’s acquisition of UK-based Lodestone and Brilliant Basics to expand digital transformation and UX/UI consulting capabilities in Europe (2017);
• Wipro’s acquisition of Capco, a global technology consultancy in the BFSI sector, to deepen its presence in the financial services market (2021);

These deals enabled Indian companies to rapidly diversify revenue streams, build multinational delivery networks, increase client stickiness, and transition from volume-based outsourcing models to high-value strategic partnerships. Although these are big ticket deals small and medium sized tech companies from India have picked up this philosophy to garner global growth.

(ii) Extending the Model to Manufacturing and Industrial Sectors

The same underlying strategic logic is now increasingly applicable to manufacturing sectors, particularly as India undertakes structural reforms to enhance domestic industrial capacity. Indian businesses across automotive components, specialty chemicals, electronics, packaging, industrial machinery, and clean energy solutions are exploring overseas acquisitions for:

• Brand ownership and heritage value, particularly where UK or EU companies have established reputations for quality and design.
• Market access through existing distribution channels across Europe and North America.
• Advanced process know-how and certifications, especially in regulated markets such as aerospace, pharmaceuticals, and food packaging.
• Collaborative R&D in materials science, clean technologies, and energy efficiency.

By acquiring or partnering with SMEs in the UK or EU, Indian firms can transfer production to India for cost advantages while retaining the acquired company’s IP, brand identity, and customer relationships in developed markets. This dual-location model optimises both cost and market credibility.

Examples include:

• Raghu Vamsi Group’s Acquisition of PMC Groupto expand its global footprint in manufacturing components for the oil and gas industry and enter the European market, combining its manufacturing strengths with PMC’s expertise in precision machining (2024);
  • Shriram Pistons & Rings Limited’s Acquisition of TGPEL Precision Engineering to diversify and expand its product portfolio with TGPEL’s expertise in manufacturing precision moulds & injection-moulded components (2024);

Such acquisitions will pick up pace as India continues to expand its logistics and industrial corridors under the:

• PM Gati Shakti programme² that seeks to incorporate the infrastructure schemes of various Ministries and State Governments like Bharatmala, Sagarmala, Inland Waterways, Dry/Land Ports, UDAN; to connect all Economic Zones like Textile Clusters, Pharmaceutical Clusters, Defence Corridors, Electronic Parks, Industrial Corridors, Fishing Clusters and Agri Zones to make Indian businesses more competitive;
• The Production Linked Incentive (PLI)³ scheme designed to boost domestic manufacturing and exports by incentivizing companies for incremental sales of products manufactured in India. The scheme encourages import substitution and increase the competitiveness of Indian industries;

This is how the acquisition model becomes not only viable but highly attractive for UK-based SMEs seeking capital, scale, and access to growing Asian markets.

Rewarding partnership

Acquiring ownership stakes in UK-based SMEs allows Indian entrepreneurs to combine several key assets:

• The brand equity and goodwill of the acquired UK business: UK-based SMEs often possess decades of built-up brand equity, customer loyalty, and a reputation for engineering excellence, especially in sectors like automotive, aerospace, and precision manufacturing. This goodwill translates into trust with buyers, regulators, and supply chain partners across developed markets. For an Indian acquirer, inheriting this brand positioning provides immediate credibility and access to premium markets. It also reduces the time and cost associated with building recognition from the ground up.
• India’s cost-effective manufacturing capabilities: India offers significant cost advantages in manufacturing due to lower labour costs, access to a wide supplier base, and improving infrastructure. Government initiatives such as the Production-Linked Incentive (PLI) schemes and industrial corridor development further incentivize capital investment in domestic production. Indian facilities can operate at globally competitive costs while adhering to international quality and compliance standards. This allows acquired UK businesses to scale output profitably by shifting production to Indian plants without compromising product quality.
• A deep talent pool in engineering, digital, and operational domains: India is home to a large, highly skilled workforce with strengths in mechanical engineering, industrial design, information technology, and process optimisation. The country produces over a million engineering graduates annually and has an expanding ecosystem of industrial training and applied R&D institutions. Indian professionals are increasingly experienced in working with global clients and operating across diverse regulatory environments. This talent base enables acquired firms to integrate new technologies, streamline operations, and expand into new product categories quickly and efficiently.
• Access to capital and scalable domestic infrastructure: Indian tech companies, after acquiring overseas businesses, have successfully leveraged domestic capital markets by launching public offerings at a premium; attracting widespread investor interest due to the strategic value of the acquisitions. India’s deep and increasingly sophisticated pool of retail and institutional investors provides access to significant capital, especially for companies demonstrating global ambition. The raised funds are deployed across both domestic operations and international subsidiaries, enabling unified growth. Simultaneously, India’s expanding industrial and digital infrastructure allows these companies to scale operations efficiently, supporting a global delivery model.

This model has already proven effective in the technology sector. A natural extension of this strategy is to replicate it in manufacturing and related industrial segments.

Legal and Regulatory Considerations

As UK–India business ties deepen, lawyers advising on cross-border matters must remain vigilant on several regulatory fronts:

• Due diligence challenges in UK acquisitions e.g., IP chain of title, employee TUPE liabilities, regulatory approvals under NSI Act 2021.
• Structuring of investments, including ODI/OPI distinctions, FEMA regulations and taxation implications under DTAA.
• IP rights transfer and licensing, especially where Indian acquirers seek to preserve UK brand assets.
• Employment and immigration law, particularly regarding mobility of senior personnel and technical experts, UK TUPE Regulations and proposed liberalisation under FTA.
• Governing law and dispute resolution clauses such as choice of law, arbitration under LCIA or mediation, anticipated legal instruments or dispute settlement mechanism under the FTA.

An integrated advisory framework involving legal, tax, and sectoral specialists is indispensable for executing cross-border transactions with regulatory and strategic alignment.

Conclusion

India’s emergence as both the back office and factory to the world, supported by Capital Market depth and favourable demographic trends, coincides with the UK’s strategic realignment post-Brexit. These factors create fertile ground for a bilateral economic renaissance, particularly through the activation of the UK–India Free Trade Agreement.

For SMEs on both sides, the coming decade holds unprecedented opportunity, provided they are equipped with the right partnerships, policy support, and professional advice. Legal counsel has a pivotal role to play in translating this potential into sustainable cross-border success.

How gunnercooke can help

gunnercooke’s India Desk comprises experienced lawyers with ties to the Indian market across M&A, capital market, banking and finance, intellectual property, employment law, international arbitration and dispute resolution. We act for multiple Indian clients and are familiar with the practical restrictions, work environments and cultural nuances required to navigate cross-border transactions with India. The core team all have qualifications or strong ties with India, frequently supporting clients and businesses based in India on cross-border matters in the UK, US or EU. The team speak local languages such as Hindi, Punjabi, Marathi, Gujarati and Bangla.

We are geared to serve Indian as well as UK-based clients on all cross-border transactions be it in corporate, capital market or arbitration and litigation.

Learn more about our India Desk here.