Introduction
On April 28, 2025, Canada elected a new Prime Minister. During his victory speech, Prime Minister Mark Carney stated that the “old relationship with the United States … is over.” He added that Canada will strengthen its “relations with reliable partners in Europe."[1]
This election took place during a time of crisis for Canadian businesses grappling with the dramatic end of the historic trading relationship with the United States (US). Any renegotiation of the Canada-US-Mexico trade agreement (CUSMA) will need to take into consideration this fundamental change. Doing business in the US now carries with it new risks and unpredictability. Tariffs at punitive levels are a constant threat, and business visitors are worried about crossing the border. Canadian consumers are boycotting US products in response to the US President’s comments about annexing Canada. New trade and business opportunities are being sought by Canadian businesses to diversify risk, or in some cases to replace a market that is no longer available or viable. And this is not unique to Canada – many other countries find themselves likewise concerned about trade with the US and are seeking new partners.
As a former Governor of the Bank of England, with close personal ties to the United Kingdom (UK), it is expected that Great Britain will be one of Carney’s top ports of call towards forging stronger trade relations with European nations. UK Prime Minister Keir Starmer’s comments reflect this tie, noting that Canada and the UK are the “closest of allies” and remarking on Carney’s close personal connection to the UK. He added that Canada and the UK will “work together to deepen our economic relationship." Further highlighting the relationship between the two countries, King Charles delivered the speech from the throne to the Canadian Parliament on May 27, 2025.[2]
The UK is also actively seeking new or renewed trading relationships. The relatively new British Prime Minister is under pressure to lift the UK economy from a period of stagnant growth following Brexit. Although a US-UK trade agreement was recently announced,[3] it appears to do little more than reduce the sting of severe worldwide tariffs announced by President Trump on April 2, 2025. Meanwhile, the UK has recently announced trade agreements with the European Union (EU) and India. Clearly, the UK is anxious for more global trade.
In anticipation of a broader relationship between the UK and Canada, this bulletin provides an overview of the trade regime between these two countries, and bilateral opportunities for business.
Market Potential
Canada and the UK have much in common, including the English language, a system of law and government, defence alliances, a common monarch, and membership in the Commonwealth, the G7 and the Five Eyes intelligence alliance. The two countries have a strong trading relationship in terms of both value and volume. The UK is Canada’s third largest trading partner, behind the US and China. In 2024, Canada exported $28.3 billion in goods to the UK and imported $9.2 billion.[4]
The UK, with a GDP of over $2.7 trillion pounds (£), is one of the largest economies in the world. It is a hub for industries such as finance, technology, health, and manufacturing, supported by top ranked universities like Oxford and Cambridge. Additionally, its system of taxation can be attractive to Canadian business.
In addition, the UK serves as a strategic gateway to the EU, a market with over 500 million consumers. Canada already has a major trade agreement with the EU (Comprehensive Economic and Trade Agreement (CETA)), as well as the UK (Trade Continuity Agreement (Canada-UK TCA)) discussed below. Canadian businesses can use the UK as a hub to both UK and EU markets, given the existence of trade agreements with both.
Conversely, Canada is a global leader in the supply of many raw materials, particularly critical minerals, oil and gas. Carney has stated that he seeks to make Canada an energy superpower. Canada has also increasingly made its mark globally in key service sectors and technology. The UK, in particular London, is itself a global powerhouse in the area of services, making the two countries an interesting match.
Canada has announced an anticipated major increase in defence procurement, and appointed a Secretary of State (Defence Procurement). Reliance on US-based defence and commercial supply chains is under review in Canada. The UK has likewise announced a significant increase in defence spending. This creates an opportunity for other Canadian allies, like the UK, including opportunities for joint ventures between Canadian and UK businesses.
UK-Canada Trade Continuity Agreement
It is notable that Canada and the UK already have a strong free trade agreement: the Canada-UK TCA.
The Canada-UK TCA came into force on April 1, 2021, following Britain’s departure from the EU (Brexit), and reflects the principles of the CETA. The Canada-UK TCA ensures that Canadian and UK businesses enjoy equal and non-discriminatory access to each other’s markets.
The Canada-UK TCA offers numerous benefits for Canadian and UK exporters. At the top of the list is an elimination of most tariffs, new investment opportunities and increased labour mobility. The agreement delivers fairness, stability and certainty in the relationship for business by introducing the rule of law where there are disputes. The Canada-UK TCA also allows Canadian and British companies to access the entire public procurement sector of the other nation, from national through to the municipal, academic and health care sectors.
On May 25, 2025, the British High Commissioner to Canada stated that the UK was waiting for the Canadian government to return in order to resume bilateral trade talks.[5]
Support for Canadian Exporters
Retooling a business to export to new markets can be expensive and complicated, even with a relatively accessible market like the UK. With the dramatic changes between Canada and the US, the Canadian government is taking proactive steps to support businesses affected by the ongoing trade tensions, creating financial packages and resources, including financial assistance, loans, and advisory services to help businesses navigate challenges such as market access, cash flow issues and increased costs, and to help businesses find new export markets. For example:
- Canada’s Trade Impact Program will deploy approximately $6 billion over two years to help exporters reach new markets and assist companies in navigating challenges like non-payment, currency fluctuations, cash flow issues, and barriers to expansion.
- Export Development Canada (EDC), Canada's export credit agency, is actively working to assist Canadian exporters under the Trade Impact Program and elsewhere. The profile of the kind of Canadian company eligible to receive assistance has also changed to recognize the need for businesses to diversify away from the US market. EDC offers trade finance, export credit insurance, bonding services, and foreign market expertise. It has a London office with expertise in the UK market.
- The Business Development Bank of Canada has announced $500 million in favourably priced loans to support businesses impacted by tariffs, including those in directly affected sectors and their supply chains. Additionally, businesses will have access to advisory services in areas such as financial management and market diversification.
Meanwhile, the UK is taking active steps itself to diversify its global trading relationships, as it seeks to recover significant loss of business with the EU following Brexit. The establishment in the UK of investment zones, for example, offering attractive tax and financial incentives, presents opportunities for Canadian businesses in the advanced manufacturing, life sciences and technology sectors in particular.
Conclusion
While Canadian business is understandably concerned about the future, it has the opportunity to emerge from the current crisis stronger and more robust. For businesses from both Canada and the UK, there are currently opportunities, driven by necessity and supported by an existing strong trading relationship, commonality of approach and historical ties. Should Canada and the UK proceed with broadening their trade relationship, these opportunities will be increased.
About Fasken in the UK
Fasken is Canada's largest law firm and has the largest UK office among Canadian law firms. From its office in London, and its offices in numerous Canadian cities, the Firm acts as legal counsel on significant transatlantic corporate and litigation matters. Fasken is proud to have been selected to be on the UK panel for international trade disputes, reflecting its strength in this complex field of law.
