Britain ‘just scratching the surface’ of Saudi trade potential

Reuters/Lee Smith

• Saudi-UK clean energy deals are ‘two-way street’ for collaboration
• £11.3bn worth of trade between the two countries in year to end of Q1
• Opportunities in joint tech, education, healthcare and tourism projects

More big ticket Saudi investments are likely in the UK as the two countries seek closer clean energy collaboration to feed into their net zero ambitions.

The announcement by Saudi Arabia’s Alfanar Group that it will invest £1 billion in a sustainable aviation fuel project on Teesside in the north of the UK could act as a catalyst for more investments, according to Chris Innes-Hopkins, executive director of the Saudi-British Joint Business Council (SBJBC).

Fotowatio Renewable Ventures, part of Saudi-based Abdul Latif Jameel Energy, has also launched the UK’s largest battery storage development project in Essex. Pioneering battery technology developer Britishvolt is seeking Saudi investment for its £3.8 billion battery gigaplant in north east England.

“Alfanar’s investment in clean aviation fuel in Teesside could be a catalyst. I think other investments will follow,” Innes-Hopkins told AGBI.

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“There is a two-way street here,” he said. “Saudis have an appetite for investing in the clean energy technology being developed in the UK and then taking that technology back to Saudi Arabia.”

He added: “There are lots of opportunities to work together and it’s a strategic sector for both countries. Both are committed to their net zero targets.”

Saudi Arabia aims to be net zero by 2060 with the UK planning to complete its transition a decade earlier but it’s not just clean energy that will drive growth in bilateral trade and investments, he stressed, highlighting opportunities in technology, healthcare, tourism and education.

Last month SBJBC signed a memorandum of understanding with the Ministry of Communications and Information Technology to cooperate on the development of the Saudi UK Tech Hub.

Launched with the support of the Future Investment Initiative (FII) Institute and the UK Science & Innovation Network, the hub’s initial priority sectors are fintech, cleantech and healthtech.  

Innes-Hopkins, a former senior diplomat, whose posts have included director UK of Trade & Investment in Saudi Arabia and deputy head of mission in Kuwait, said the collaborative network will help to promote investment, partnerships, and expertise exchange.

This is echoed by Andrew Nichol, partner of Lumina Capital Advisors, who said: “The Saudi UK tech hub is another great example of collaboration in enabling tech innovation.

“Over the past few years we’ve seen the mega deals at the government level, but these transactions are filtering down to public and private investments and the Tech Hub will be a key facilitator in this. Ultimately, it is on strategy and directly aligned with the key pillars of the kingdom’s Vision 2030.”

Total trade in goods and services between the UK and Saudi Arabia was £11.3 billion in the four quarters to the end of Q1, an increase of 6.4 percent, or £683 million.

“Trade dipped a bit during the pandemic, affecting the goods side in particular but the services side has always been strong,” said Innes-Hopkins.

“In a nutshell we are building on a very good base, but there’s a lot more we can do and in some ways we are still only scratching the surface in Saudi Arabia.”

Around 6,500 UK VAT-registered businesses exported goods to Saudi Arabia, while about 700 businesses imported goods from the kingdom in 2020, according to the latest figures available from the UK government.

He added that there is tremendous demand in Saudi Arabia for UK advice and expertise to help the country realise its Vision 2030 implementation.

SBJBC members are involved in many of the gigaprojects driving the transformation of the kingdom, including project management giants Atkins and Mace on the Red Sea Project and Qiddiya, and Foster & Partners, which has had a key design role on the Red Sea Project.

Geotechnical contractor Keller Group also recently won a contract to undertake work on the huge Neom project in north west Saudi Arabia. The company estimates a value of £50m, with the work set to be completed within the next year.

Reuters/Saudi Royal Court

‘A good time to look’

Education is also an important sector for UK-Saudi collaboration, according to Innes-Hopkins, after the kingdom opened the door to foreign campuses. 

“A number of UK schools are setting up locally and more will follow. It will be schools initially, but I think British universities could follow and there are already a number of university partnerships with exchange programmes.”

He revealed that Steve Smith, the UK’s international education envoy, has spent a lot of time in Riyadh recently, leading high-level delegations to explore opportunities. 

Tourism is also piquing the interest of British firms as Saudi Arabia aims to become one of the top global tourism destinations by 2030, welcoming 100 million visitors annually. 

“It’s the big new employment sector and there are opportunities for UK firms around training the Saudi nationals and creating a career structure in the industry as well as helping build the big projects,” said Innes-Hopkins.

But he conceded that there are still barriers to UK firms wanting to enter the Saudi market.

Asked about the impact of a successful UK-GCC free trade agreement, he said: “I don’t think tariffs are a particular problem for UK companies in Saudi Arabia, it’s more about investment licensing, visas, bureaucratic challenges and trying to improve the business environment.

“The process for setting up locally is the key challenge. While it’s easier to get an investment licence now, it’s all the other permissions needed before you get your full commercial registration and your right to work and opening a bank account.

“This currently can take months. I think there is a commitment to try to speed that up and create a one-stop-shop and that would help a lot.”

He added that another issue facing smaller UK companies trying to get a foothold in Saudi is late payments.

“While this isn’t exclusive to Saudi, it is an issue for SMEs that comes up time and again and we are working with authorities to try to address this, particularly where public sector organisations are concerned.

“Again there is progress as they’ve set up a public procurement platform which is more transparent and where payments can be tracked but further improvements would help to get more companies interested in the Saudi market.”

Despite the challenges, Innes-Hopkins sees growing interest from British firms about entering Saudi Arabia. “It’s definitely a good time for UK firms to look at Saudi.

“We need to leverage more private sector deals from the strong government to government relationship across a range of sectors. It’s not a market you can ignore with its strong GDP growth.”