Oil and services grow UK-GCC trade to $83bn

via Reuters

• UK-GCC trade rose by more than 70% in FY2022-23
• UK imported over £15bn of oil and gas from GCC states
• Two-thirds of Saudi trade with UK was for services, rather than goods

Total trade between the UK and GCC countries rose by more than 70 percent to £64.5 billion ($82.7 billion) in the year to the end of March, driven by rising oil prices and a demand for services as Gulf states move to diversify their economies.

According to an AGBI analysis of statistics released by the UK’s Department for Business and Trade on Tuesday, trade in goods and services eclipsed last year’s figure of £37 billion.

Over £15 billion of trade consisted of UK imports of oil and gas from GCC countries.

The fourth round of negotiations on a free trade agreement took place last week in London.

Discussions were held across 23 policy areas over 44 sessions and “good progress” was made, a government statement said.

Freddie Neve, senior Middle East associate at analyst Asia House, told AGBI that oil still accounts for a significant portion of UK-Gulf trade.

Average prices rose to $100 a barrel last year, compared with almost $70 in 2021.

“The UK has increased its purchases of Gulf oil and gas since the start of the Ukraine conflict to compensate for supplies it previously received from Russia,” Neve said.

The growth of services

Neve added that trade also continues to be boosted by the GCC’s efforts to diversify away from oil. This has encouraged growth in Gulf imports of UK professional services to assist delivery of various projects.

UK exports of services to the region rose significantly last year to nearly £18 billion. 

Saudi Arabia, for example, is undergoing a major transformation with giga-projects such as Neom taking shape.

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Chris Innes-Hopkins, UK executive director of the Saudi British Joint Business Council, said the latest figures reflected a “growing engagement” by UK companies in new sectors of the fast-growing Saudi economy.  

“The services sector is particularly buoyant and it’s good to see many smaller UK companies getting involved in fintech, creative industries and education opportunities among others,” he said.

Government interest

Foreign secretary James Cleverly highlighted the UK’s growing partnership with Gulf countries last week during a three-day visit to Qatar, Kuwait and Jordan.

The UK government has announced that citizens from Gulf countries and Jordan will be among the first to benefit from the UK’s new Electronic Travel Authorisation visa scheme, which will make travel to the British isles cheaper and easier for visitors.

According to the Department for Business and Trade figures, the UAE was the UK’s largest trade partner in the Gulf last year, followed by Saudi Arabia.

Bradley Jones, executive director of the UAE-UK Business Council, said the Cop28 environmental conference, which will be hosted in Dubai later this year, is “really drawing attention” to opportunities for UK-UAE collaboration in sustainability and decarbonisation. 

“We have seen important new partnerships developing between companies such as Masdar and Octopus Energy, and I am sure we will see more over the coming months,” he said.

Octopus Energy

Lord Dominic Johnson, a minister of state in the UK’s Department for Business & Trade, added: “We are seeing extraordinary rates of growth for British companies operating in the Gulf.

“I spoke to one of the big accounting firms. They’re looking at 35 percent annual growth.”

He said that he met a number of construction and infrastructure companies last month at the prime minister’s business reception in Downing Street who are reporting ”phenomenal rates of growth”, particularly in Saudi Arabia.

UK secretary of state for business and trade, Kemi Badenoch, visited Qatar, Saudi Arabia and the UAE in May to maintain momentum on the potential trade deal.

“UK trade with GCC countries increased substantially in 2022, reflecting a strong bounce back from pandemic-related disruption,” James Caldecourt, director and head of international trade at Deloitte, said.

“With a global shift from fossil fuels towards clean energy, GCC countries are diversifying their economies, creating a growing market for UK firms to be part of this transformation.”

The UK launched trade deal negotiations with the GCC last June, with a fifth round of negotiations scheduled in the Gulf later this year. 

Raghu Mandagolathur, CEO of Marmore Mena Intelligence, a research subsidiary of Kuwait Financial Centre, said the free trade agreement is anticipated to increase trade by at least 16 percent and add nearly $2 billion a year to the UK economy. 

“A bilateral trade agreement will provide opportunities for GCC chemical companies to gain early access to the UK market at favourable terms,” Mandagolathur said, adding that GCC exports to the UK are set to grow by more than 10 percent by 2035 while GCC imports will likely grow by over 35 percent. 

“Both UK and the GCC could potentially benefit from their cooperation specifically in the areas of chemicals and petrochemicals, energy, food security, sustainability standards and intellectual property,” he said.