Sir Keir Starmer is preparing to pursue a pioneering trade agreement with Donald Trump focused on digital services, according to Gareth Thomas, the exports minister.
The move comes amid a looming threat of global trade tensions, yet ministers insist there are “definitely possibilities” of forging lucrative ties with the world’s largest economy.
Mr Thomas said: “There are always possibilities of doing deals in the US, certainly around digitalisation and services. We’ve got a lot to offer and a lot of areas where we could work on, so there are definitely possibilities. We’ll have to see how those play out over time. But it’s in the US’s interests as well as the UK’s interests for us to work together.”
Government insiders suggest the Labour leader has already raised trade issues with Mr Trump, who in turn has hinted a deal can be “worked out” while claiming he and Sir Keir are “getting along very well”. Washington sources believe a partial agreement could be achieved within months, particularly if negotiations focus on technology, digital trade and services — the areas seen as most promising for UK exporters.
Britain’s bid to secure a comprehensive pact has faltered in the past, derailed by disputes over agricultural standards relating to chlorinated chicken and hormone-fed beef. An attempt to sign a full free trade deal with Mr Trump during his first term stalled once Joe Biden took office, prompting UK ministers to explore more limited arrangements.
Digital services are seen as a gateway for growth, with the US already the UK’s single largest trading partner. British exports to America hit £182.6bn in the year to November, with services accounting for 69pc, underscoring the potential for a tech-focused deal. The digital trade agreement the UK signed with Singapore in 2022 is touted as a possible blueprint: it streamlined regulations for professional and financial services, law firms, banks and tech companies.
However, the UK’s digital services tax – which raises nearly £700m by targeting revenue generated by companies like Google and Meta – will likely prove a sticking point. Mr Trump and technology magnate Elon Musk have both voiced their opposition to the levy. Shadow Chancellor Rachel Reeves is expected to review the tax in the event of a trade breakthrough.
Meanwhile, Sir Keir has established a “mini-Cabinet” tasked with persuading Mr Trump to reach a favourable arrangement, in line with growing optimism among senior Labour figures that a pragmatic, sector-based pact stands a stronger chance of success than a full-blown deal. Peter Mandelson’s appointment as ambassador to Washington would also, the Government believes, bolster Britain’s advantage through his extensive trade background.
Despite the push for closer ties with the US, Mr Thomas cautioned that the UK should not have to choose between Washington and Brussels if new trade wars flare up. “We should essentially choose both. There are things we could do to improve the trading relationship with the EU, which we should crack on with,” he added.
Industry experts concur that services exports, boosted by digital channels such as websites, apps and cloud computing, offer a significant opportunity for British growth. HSBC’s head of global trade solutions, Stephanie Betant, said: “Services really are an opportunity for the UK. It’s a big services economy but it exports less services than it produces. What we also know is that in global trade, services are growing faster than goods, so it’s a growing opportunity.”
The UK is the world’s second-largest services exporter, and since leaving the EU, its services exports have thrived while goods trade has lagged behind comparable nations. Ministers now hope a fresh diplomatic drive could deliver a modern digital services agreement with the US, revitalising Britain’s international trade prospects despite the ever-present risk of tariff flare-ups on both sides of the Atlantic.
