UK and China: The Trade Relationship Britain Can't Afford to Ignore

Introduction

In early 2025, the UK and China held their first Economic and Financial Dialogue in years, signalling a cautious thaw in relations. The talks focused on financial services, green energy, and trade barriers — and were valued at an estimated £600 million over five years for the UK economy.

The numbers tell a compelling story. But behind the headline figures lies a deeper dilemma: how does Britain engage with the world's second-largest economy without becoming dangerously dependent on it? And with cheap Chinese EVs flooding European markets and Chinese goods undercutting British manufacturers, is closer trade a lifeline or a trap?

The Benefits

Cheaper Goods and Lower Inflation

The most immediate benefit of deeper UK-China trade is simple: cheaper stuff. Chinese manufacturers produce consumer goods, electronics, and increasingly cars at prices that British and European competitors struggle to match.

According to The Guardian, the influx of competitively priced Chinese imports could help reduce UK inflation — a meaningful benefit for households still feeling the squeeze from the cost-of-living crisis. Morningstar analysts have echoed this, noting that trade diversion from US tariffs could redirect affordable Chinese goods to the UK market.

The EV Revolution

Chinese car brands — BYD, MG (now owned by SAIC), Nio, and others — are transforming the UK automotive market. In 2025, Chinese brands accounted for 9.7% of new car registrations in the UK, nearly doubling their share from the previous year. BYD alone has overtaken Tesla in UK sales.

For consumers, this means access to high-quality electric vehicles at prices significantly below European and American rivals. A BYD Seal costs roughly £15,000 less than a comparable BMW i4. For the UK's net-zero ambitions, cheaper EVs could accelerate the transition away from petrol cars.

Green Energy Cooperation

China dominates global renewable energy manufacturing — solar panels, batteries, and wind turbine components. The UK's net-zero targets depend, in part, on access to Chinese supply chains. Cooperation in green finance, carbon markets, and clean technology could benefit both sides.

The Risks

Trade Imbalance

The UK's trade deficit with China is growing fast. In the year to Q3 2025, the UK imported £72.9 billion in goods from China while exporting just £29.4 billion — a deficit of £43.5 billion. UK goods exports to China fell 22% in the same period. Britain is buying far more than it sells, and that gap is widening.

Threat to British Industry

The same cheap EVs that benefit consumers threaten British and European car manufacturers. European Business Magazine has reported that Chinese EV makers, backed by massive state subsidies and manufacturing efficiencies, are hollowing out the competitive position of traditional carmakers. Jaguar Land Rover and Stellantis's UK operations face an uncertain future.

Supply Chain Dependency

The UK's increasing reliance on Chinese supply chains — for solar panels, batteries, rare earth minerals, and pharmaceuticals — creates vulnerabilities. Political tensions, manufacturing disruptions, or export controls from Beijing could have immediate consequences for British industry and infrastructure.

National Security

Then there are the security concerns that never quite go away. Data-sharing with Chinese tech companies, Huawei's exclusion from 5G networks (and the cost of replacing its equipment), and concerns about Chinese investment in sensitive sectors all cast a shadow over the trade relationship.

Finding the Balance

The answer is not to disengage from China — that ship has sailed, and the economic costs would be enormous. Nor is it to invite dependency. The UK needs a strategic trade policy that:

1. Welcomes competition where it benefits consumers (EVs, green technology, consumer goods)
2. Protects critical industries where dependency creates vulnerability (semiconductors, defence, energy infrastructure)
3. Diversifies supply chains so that no single country can hold the UK economy hostage
4. Engages with confidence — negotiating from a position of clarity about what Britain wants, rather than simply reacting to what China offers

Conclusion

The UK cannot afford to ignore China. It is the world's largest manufacturer, its biggest exporter, and an essential partner in the fight against climate change. But engagement must be clear-eyed. Cheaper EVs and consumer goods are welcome. Supply chain dependency and strategic vulnerability are not.

Do you think the UK should embrace cheaper Chinese goods, or protect its domestic industries? Where should the line be drawn? Share your thoughts below.