Analysis Development Trade commissioner: UK and GCC have endless opportunities By Melissa Hancock June 20, 2022 Creative Commons Special relationship blossoms: British foreign secretary Liz Truss with GCC foreign ministers Deals between regions last year total £30bn despite pandemicUAE invests £10bn in UK technology, infrastructure and renewablesUK wants free trade agreements to account for 80% of trade The Gulf states and the UK have historically enjoyed strong diplomatic and trade ties, but this decades-long alliance has intensified in the last two years. As UK businesses look to drum up new trade in the wake of Brexit and the coronavirus pandemic, the Gulf looks set to become ever closer to Britain. Pre-Brexit, around 40 percent of the UK’s exports were EU-bound. Following the exit from the single market, UK-EU exports dropped by 12 percent last year – a loss of £20 billion. UK targets Gulf for growth post-Brexit and CovidUK and UAE are powering the global energy transitionUK-Gulf deal will be ‘tough nut to crack,’ says top Johnson ally UK trade with the GCC totalled £30 billion last year, despite the havoc wreaked by the pandemic and ranged from high-tech manufactured goods and pharmaceuticals to F&B exports – the latter worth £597 million alone. “Our trade relationship with the Gulf is strong,” Simon Penney, Middle East Trade Commissioner for the Department for International Trade (DIT) and Her Majesty’s Consul General to Dubai and the Northern Emirates, told AGBI. “Taken as a bloc, the GCC is the UK’s third largest export market outside the EU. Only the US and China buy more UK goods and services,” Renowned for its business-friendly regulation and long-established ties with the UK, the UAE ranks as the UK’s 25th largest trading partner globally and remains the preferred entry point into the Gulf. In September last year the UAE cemented this relationship further when it announced it would invest £10 billion ($13.8bn) in priority sectors in the UK under the expanded UK Sovereign Investment Partnership. The investment built on an earlier £800 million ($1.1bn) commitment to the life sciences sector announced in March. Under the Partnership for the Future bilateral framework the UAE is set to invest in Britain’s technology, infrastructure and energy transition, as well as joint pledges on climate action. Saudi offers ‘once-in-a-lifetime’ opportunities “The UAE is well known to exporters and will continue to be the ‘soft-landing’ for many companies,” added Penney. “Around 40 percent of total UK-GCC trade is with the UAE. However, as opportunities in other countries open up, this is great news for British companies. “It’s fair to say Saudi Arabia’s Vision 2030 presents a once-in-a-lifetime opportunity for UK businesses across almost every sector.” UK bilateral trade with Saudi Arabia stood at £11 billion in 2021 and Penney expects this figure to grow significantly in the years ahead as Vision 2030 accelerates. He notes how Saudi Arabia’s burgeoning leisure, tourism and entertainment industries open up the market to whole sectors, such as hospitality and the experience economy, which is proving exciting for UK companies with world-class capability in these sectors. Given the size of its market – Saudi Arabia’s population stands at 34 million with around 50 percent being under the age of 30 – and its rapidly liberalising economy, many UK companies have started to eye up the potential opportunities. Today, approximately 70 percent of total UK-GCC trade is made up of UK trade with the UAE and Saudi markets. “While the UAE is often their first export destination, UK companies are succeeding across the GCC,” Penney added. Multi-sector, multi-country growth Penney noted how two of the eight stadiums that will play host to the Qatar World Cup Finals this year were designed by UK-based BDP Pattern. Also in infrastructure, UK companies have been supporting Bahrain’s sustainability and clean growth efforts with Mott Macdonald working with the government on a waste to energy facility, and Bluewater Bio’s HYBACS technology being used to upgrade and expand wastewater treatment plants. Education is also an area of increased business collaboration due to the growing appetite for high-quality UK education across the region. “My teams in Muscat and Riyadh have helped British independent girls’ school Downe House enter Oman and Saudi Arabia,” Penney said. “And the Kuwait Society for the Handicapped has commissioned Derwen College to develop the curriculum for Kuwait’s first college for people with special educational needs and disabilities. The new custom-built college is opening this autumn.” Looking ahead, between 2019 and 2035, the GCC’s imports from the UK are projected to grow by around 35 per cent in real terms, according to the UK government. “I’m confident that the government projections are realistic,” Penney said. Simon Penney, Middle East Trade Commissioner for the Department for International Trade He noted that priority sectors are those where the UK has capability and which are also areas of strategic importance in the GCC. These include renewable energy, healthcare and life sciences, financial and professional services, education, infrastructure and technology. The GCC vision strategies, such as Saudi Vision 2030 and the Abu Dhabi Economic Vision 2030, coupled with their stated ambitions – such as the UAE’s commitment to net zero by 2050 – are areas of opportunity for UK publicly listed companies. Exports from the GCC’s two largest economies, Saudi Arabia and the UAE, in particular are set to rise considerably over the next 10 years. Saudi goods exports will rise from US$171 billion to US$354 billion between 2020 and 2030, whereas UAE goods are projected to grow from US$166 billion to US$299 billion over the same period, according to recent figures from Standard Chartered bank. “Many companies now realise that the opportunity is there across the whole region and this is where DIT teams on the ground can really make a difference, in bringing companies out to the other countries in the GCC and indeed the wider Middle East and Pakistan region that I cover,” Penney said. The anticipated free trade agreement (FTA) between the Gulf and UK would represent a major milestone in the UK’s post-Brexit global trade agenda. The UK government wants FTAs to account for 80 percent of its cross-border trade by year-end 2022 and has been vocal about how the GCC is a key market to help realise this ambition. In January this year the UK concluded a public consultation on a bloc-wide trade deal with the GCC. “The results of this consultation will form our negotiation mandate, and we plan to launch trade negotiations soon,” Penny said, before sounding a note of caution about timelines. “To give you an idea of how long other agreements have taken to negotiate, the UK launched trade negotiations with Australia in June 2020, and an agreement was signed in December 2021.” While the deal was originally slated to close by Q4 2022, the deadline is likely to slip. Speaking to AGBI last month, Lord Udny-Lister, co-chairman of the UAE-UK Business Council, said: “It’s unlikely to be done by then,” adding that the Gulf agreement will be a “tough nut to crack”. It is more likely, said Lister, that a series of individual agreements with the Gulf countries will be finalised before the wider GCC-UK trade deal is inked. However, there are clear incentives for the GCC to broker a deal – the UK enjoyed a notable trade surplus with the GCC worth around £13.8 billion in 2020, while at a time when Gulf states are rapidly diversifying their economies, an FTA would enable them to encourage growth in developing economic sectors.