UK trade with the US (Parliamentary evidence)
Overton Advisory submitted written evidence to the Business and Trade Committee’s inquiry into Trade with the US. The original is available here.
Summary
The Economic Prosperity Deal was a welcome short-term stabliser, but for many of Overton’s clients in the deterrence, defence, dual-use, and advanced manufacturing sectors, it has not adequately addressed their main problem.
Tariffs matter, but for the clients we advise, the International Traffic in Arms Regulations and Export Administration Regulations i.e., the US licensing regime governing trade in defence-relevant and dual-use goods, are a more significant constraint on UK-US trade than any tariff. This is the central gap the Business and Trade Committee should press the Government to address because they are slower, costlier, and more disruptive. They are subject to unilateral change by the US government without notice or compensation. And they have not been mentioned in any of the three deals announced to date.
Beyond export controls, three further issues are directly affecting the businesses we advise:
Steel and aluminium tariffs at 25% are causing US prime contractors to substitute UK-sourced components with domestic alternatives on cost rather than capability grounds. This has forced many of our UK-based clients to focus on European and Middle Eastern markets to mitigate those losses.
Industrial mutual recognition arrangements, which represent the highest-value non-tariff opportunity for UK advanced manufacturing exporters, remain without a published workplan or timeline more than a year after the EPD was signed.
Whole-of-government coordination across DBT, MoD, FCDO, and the Export Control Joint Unit is insufficiently joined up for sectors where trade policy, defence industrial strategy, and national security are inseparable.
The UK's defence and advanced manufacturing sectors are among the UK’s most strategically significant and growth-oriented export sectors. They underpin AUKUS, Five Eyes industrial cooperation, and NATO supply chain resilience. The next phase of negotiations with the United States is an opportunity to reflect that, but only if the Government's negotiating mandate is expanded to match the ambition.
Recommendations
On export controls and the Technology Prosperity Deal
The Government should include ITAR and EAR reform in the Technology Prosperity Deal negotiating mandate. A technology deal that does not address dual-use classification, ITAR carve-outs, or technology transfer licensing will deliver little to the UK firms most exposed to US export controls. The Government should publish, within six months, a clear account of what the Technology Prosperity Deal will specifically deliver for dual-use and defence-adjacent technology exporters.
On whole-of-government coordination
A formal cross-departmental mechanism, with MoD and ECJU representation at senior official level, should be established to integrate defence, dual-use, and advanced manufacturing priorities into ongoing US trade negotiations. AUKUS industrial cooperation should be explicitly reflected in the EPD trade architecture, with a named government lead for defence supply chain queries. The Government should explain publicly how ECJU expertise is feeding into the Technology Prosperity Deal negotiations.
On steel and aluminium
The Government should negotiate a binding quota arrangement for UK steel and aluminium exports in defence and advanced manufacturing-relevant product categories, at a tariff rate no higher than the 10% EPD baseline. A dedicated defence industrial carve-out should be sought, framed around allied manufacturing resilience and AUKUS commitments, a framing that has precedent in US trade law and is consistent with the national security rationale the US administration has itself used to justify the Section 232 measures.
On mutual recognition and non-tariff barriers
The Government should publish a workplan and timeline for Industrial Mutual Recognition Arrangement negotiations within six months, with named leads and sector priorities. Export control licensing should be incorporated into the non-tariff barrier workplan as a priority item. Any IMRA framework should include a published compatibility assessment against the UK's existing international obligations before any arrangement is concluded.
UK trade with the US
1. What has been the overall impact of US tariffs and trade policy uncertainty on your business, sector, or those you represent? How has this changed since the EPD was agreed?
Many of the clients we advise operate in the deterrence, defence, dual-use, and advanced manufacturing sectors. These sectors function in a structurally different trading environment to general exporters, one that requires specific and targeted attention as negotiations with the US develop.
These sectors run on procurement cycles spanning five to twenty years, sole-source supply chains, and deep integration with the US defence industrial base. Tariff uncertainty does not hit at the point of export, but much earlier and harder via investment decisions, in the pricing of fixed-price multi-year contracts, and in US prime contractors' decisions about where to source components. May of our UK clients have told us that tariff volatility since 2025 has created unbudgeted cost pressure in existing contracts, deferred investment in US-facing production capacity, and in at least one case caused a US prime to substitute a UK-sourced sub-assembly with a domestic alternative on cost grounds rather than capability. Resolving this is achievable, and the EPD provides a credible foundation to do so.
The next phase of negotiations presents a significant opportunity to address the constraint our clients identify as more consequential than any tariff: ITAR and EAR licensing requirements, administered by the US State and Commerce Departments. For UK companies supplying components that incorporate US-origin technology, which describes many clients we advise, these licences are slow, costly, and subject to unilateral change. Bringing export control reform into the trade negotiating mandate would be a meaningful and deliverable step that no other agreement with a US partner has yet achieved.
The Technology Prosperity Deal represents a genuine opportunity for the UK's dual-use and defence technology sectors, and we welcome its inclusion in the bilateral agenda. To realise that potential, the deal should engage directly with dual-use classification, ITAR carve-outs, and technology transfer licensing, the practical barriers that prevent UK firms from competing on equal terms in the US defence technology market.
Recommendations
The Government should include export control reform, specifically ITAR and EAR licensing, in the EPD and TPD negotiating mandates.
The next phase of EPD negotiations should address sector-specific barriers for defence and advanced manufacturing supply chains, including through targeted mutual recognition of conformity assessment.
The Government should publish a clear workplan and timeline for Technology Prosperity Deal delivery, with specific reference to dual-use and defence-adjacent technology sectors.
2. The EPD and subsequent deals span multiple government departments. What evidence is there of effective whole-of-government coordination, and where have gaps or conflicting departmental priorities emerged?
Many of the clients we advise are in the deterrence, defence, dual-use, and advanced manufacturing sectors, which sit at the intersection of multiple government departments, and the current pace of US trade negotiations makes effective coordination between them more important than ever.
DBT leads on tariff negotiations and trade policy. MoD holds primary responsibility for defence industrial policy and maintains its own bilateral channels with the US through Five Eyes and AUKUS. The FCDO manages the strategic diplomatic relationship. The Export Control Joint Unit administers the licensing regime that governs what our clients can sell. Each has a legitimate role. Where clients run into difficulty is when those roles aren't joined up and they receive different guidance from different departments, or find that progress in one workstream creates friction in another.
Three areas stand out as priorities for better coordination. First, AUKUS, the most ambitious commitment to UK-US industrial integration in decades, should be explicitly reflected in the EPD architecture. Clients involved in AUKUS-related programmes need a single, authoritative government interlocutor for trade-related questions. Second, the ECJU's expertise on export controls should be feeding directly into the trade negotiating mandate; there is a strong case for its priorities to be formally represented in the negotiating team. Third, the Technology Prosperity Deal should be developed with structured input from the defence and security technology sector, where commercial and national security considerations are inseparable.
Getting this right matters not just for process but for outcomes. The UK's negotiating position on technology and defence trade will be stronger, and more credible to US counterparts, if it is visibly coordinated across departments.
Recommendations
The Government should establish a formal cross-departmental mechanism, with MoD and ECJU representation at senior official level, for integrating defence, dual-use, and advanced manufacturing priorities into ongoing US trade negotiations.
AUKUS industrial cooperation should be explicitly reflected in the EPD trade architecture, with a named government lead for defence supply chain queries.
The Government should publish a clear account of how ECJU expertise is being used in the Technology Prosperity Deal negotiations.
3. Steel and aluminium tariffs remain at 25% for UK exporters, with quota arrangements still unresolved. What is the commercial impact of this, and what should the UK Government's minimum acceptable outcome in negotiations be?
The 25% Section 232 tariffs on steel and aluminium are creating real and immediate pressure for the advanced manufacturing clients we advise. These businesses are often intensive users of specialist steel and aluminium, in aerostructures, autonomous systems, armoured vehicle platforms, and precision-engineered sub-assemblies, and their supply chains are already constrained by the limited number of qualified suppliers capable of meeting defence and aerospace specifications.
The impact is twofold. For clients supplying under fixed-price contracts with US primes or under US Government defence contracts, the tariff creates a cost disadvantage that is difficult to absorb or pass through. Clients have told us it is beginning to shift sourcing decisions by US primes towards domestically-produced alternatives, while also shifting UK-based clients towards other markets, predominantly in Europe and the Middle East. For clients considering capital investment, in new processing capacity, tooling, or workforce, the unresolved quota position removes the cost visibility they need to commit.
There is a compelling strategic case for a defence-specific carve-out in the steel and aluminium negotiations. The UK and US share deep mutual interest in sustaining resilient allied manufacturing capacity, an interest directly reinforced by AUKUS and the depth of existing prime-to-subcontractor relationships across the two industrial bases. A defence industrial carve-out has clear precedent in US trade law and sits comfortably within the national security framing the administration has itself used to justify the Section 232 measures. Framing this as a shared industrial resilience objective, rather than a market access concession, gives it the best chance of landing with US counterparts.
Recommendations
The Government should negotiate a binding quota arrangement covering UK steel and aluminium exports in defence and advanced manufacturing-relevant product categories, at a tariff rate no higher than the 10% EPD baseline.
A specific defence industrial carve-out should be sought, framed explicitly around allied manufacturing resilience and AUKUS commitments.
Until a quota is agreed, the Government should publish clear interim guidance for affected manufacturers on available support mechanisms, including the defence procurement pipeline and relevant export finance instruments.
4. The EPD sets out intentions to address non-tariff barriers across agriculture, industrial mutual recognition arrangements, and discussions on standards recognition. What progress has been made on these commitments, and what concerns remain about the implications for UK regulatory standards?
For the clients we advise, industrial mutual recognition arrangements represent among the highest-value opportunities in the current negotiating framework, and the area where swift progress would deliver the most tangible benefit to UK advanced manufacturing exporters.
The case is straightforward. Many of our clients already produce to both British Standards and US Military Standards, and UK conformity assessment bodies have long-established working relationships with their US counterparts in defence and aerospace. The duplicative testing, certification, and approval processes that result from parallel compliance across two jurisdictions add cost and extend lead times without improving quality or safety outcomes on either side. For smaller manufacturers in particular, these costs are disproportionate and act as a practical barrier to US market entry that no tariff reduction alone can offset.
The current non-tariff barrier workplan has a significant gap. Export control licensing, specifically ITAR and EAR requirements, is, for many of our clients, more consequential than any tariff. It is also absent from the non-tariff barrier workplan, at least as publicly described. Addressing this through the Technology Prosperity Deal or the Economic Prosperity Deal should be treated as a priority, not a subsequent phase.
On regulatory standards, our clients are supportive of deeper UK-US regulatory cooperation but raise one important consideration. UK defence and advanced manufacturing firms trade globally, to EU member states, to Five Eyes partners, and beyond. Any mutual recognition framework must be designed to complement the UK's existing international obligations, not create friction with them. This is achievable with careful design and should be built into the IMRA framework from the outset rather than addressed retrospectively.
Recommendations
The Government should publish a workplan and timeline for IMRA negotiations within the next six months, with named sector leads and stated priorities.
Export control licensing, specifically ITAR and EAR, should be incorporated into the non-tariff barrier workplan as a priority item for the Technology Prosperity Deal.
Any IMRA framework should include an explicit compatibility assessment against the UK's existing international obligations, published before any arrangement is concluded.