Labour is sweeping the UK election. What does that mean for Australian SMEs?
As the final vote is tallied, here is an overview of what new Labour Party leadership could mean for traders at home.
The Labour Party is steamrolling the UK general election, with exit polls projecting a massive swing against the Conservative government after 14 years in power.
As Thursday’s election results tip against the Tories, elevating Labour leader Keir Starmer to the position of Prime Minister, it shows that British voters are desperate for change.
But how much will the change in government impact Australian businesses and startups reliant on the UK market?
As the final vote is tallied, here is an overview of what new Labour Party leadership could mean for traders at home.
Trade relationship a £20 billion question
Britain and Australia are allied culturally and historically, and no change of prime minister in either nation is likely to erode that relationship.
Economic ties remain strong, too, and were only bolstered in late 2021 with the ratification of the new Australia-UK Free Trade Agreement (A-UKFTA).
It came into force in May last year, removing tariffs on around 99% of the goods Australia exports to the United Kingdom.
The deal was brokered in a post-Brexit environment, as a Tory-led Britain sought beneficial trading relationships with nations outside the Euro zone.
Australia is the UK’s 21st largest trading partner, with bilateral trade equating to £20 billion (AU$37.91 billion) in the twelve months to the end of Q4 2023, according to the UK’s Department of Business and Trade.
The value of that two-way relationship increased by 16.4% compared to the prior corresponding period.
The UK was Australia’s 11th biggest trading partner in 2023, signifying its continual importance to local exporters, even as closer markets like China and Japan topped the charts.
Beyond Australia’s big-time exporters, the deal appears to have worked to the benefit of some smaller producers, too.
In April, Austrade celebrated the emergence of Victorian salmon roe in luxury UK retailer Harrod’, enabled by the erasure of a 20% tariff on imported salmon and trout products.
AUKUS strengthens ties
Labour seems poised to inherit leadership of a country still adjusting to its controversial exit from Europe, and Starmer has a somewhat warmer approach to dealing with the EU than his Tory opponents.
However, Starmer himself has pledged not to rejoin the EU, seemingly preserving the legacy of deals like the A-UKFTA.
The UK doesn’t just benefit from Australia’s food, wine, and raw materials under the deal, either.
April 2023 saw the inaugural Strategic Innovation Dialogue under the trade deal, bringing UK and Australian representatives together to discuss collaboration on advanced medical technology, battery manufacturing, wind power, and the potential for safe and responsible AI usage.
The next dialogue will take place in Australia in 2026.
Overshadowing all of that, of course, is the trilateral AUKUS deal, in which the UK and the US will help Australia acquire nuclear submarines.
The AUKUS deal locks Australia to the UK financially and diplomatically; Reuters reports Labour is fully behind the agreement, which will see Australia funnel billions of taxpayer dollars overseas over several decades.
After a solid half-decade of strengthening economic ties between nations, it would take some doing for Labour to extricate itself from those agreements.
It is true that A-UKFTA and Aukus were negotiated under right-leaning leaders — Boris Johnson in the UK, and Scott Morrison in Australia — with the former deal even confirmed with a ceremonial exchange of Tim-Tams.
Further, Starmer has voiced his disapproval of former Australian Prime Minister Tony Abbott’s involvement in those trade deal discussions, given Abbott’s history of controversial statements.
Yet there are few strong indicators that Australia’s flip to a Labor government, and the UK’s likely return to Labour rule, will radically overhaul the newly strengthened trading relationships between both nations.
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