With the United Kingdom looking to make up for lost EU trade and the GCC countries attempting to diversify their exports, trade agreements are becoming a priority and the door is being opened for the UK and GCC to do business more closely.
There is already a very large flow of trade passing between the UK and GCC countries, but recently both parties have made it a priority to strengthen this relationship further. When combined, the GDP of the GCC counties is equivalent to the 13th largest in the world, yet their value of international trade has not matched this. In light of this, there is a clear opportunity for the UK and GCC to come together in a mutually beneficial free trade agreement. In steps toward this, Prime Minister Boris Johnson met with UAE President HH Sheikh Mohammad bin Zayed and announced investments of £10 billion in the coming years. A similar agreement was made with the Emir of Qatar, HH Sheikh Tamim bin Hamad Al Thani.
These large investments represent a path to recovery for the UK, following the damage of Brexit and decline in foreign investments since 2017. This could have massive implications for businesses based in either the UK or the GCC countries, with new opportunities being presented and markets expanding.
While international trade may feel like a far-removed issue, it is predicted a trickle-down effect could be felt as early as this summer. For individuals, wages in the UK could increase from £0.6 billion to £1.1 billion, depending on the agreement. For brands and businesses, the prioritisation of services such as tourism, could bring them a new customer base, with a higher spending power, throughout the summer travel season.
Prioritising trade
Trade exchanges between the GCC countries and the United Kingdom increased steadily between 2010 and 2019, reaching £41 billion by the end of 2019. During this period, British exports to the GCC countries increased by 48% and GCC exports to the UK increased by 54%. However, exports underwent a significant decline in 2020 due to the Covid pandemic and corresponding restrictions, GCC exports to the UK decreased by 44% and British exports to the GCC countries decreased 16.3%.
The top products imported to the GCC countries from the UK are power generation engines (4 billion dollars), jewellery (1.5 billion dollars), cars (1.2 billion dollars), medicine and pharmaceutical products (730 million dollars), and transportation equipment (600 million dollars). While it is expected that large, specialised products like engines would be at the top of this list, as well as pharmaceutical products given the need for them in the past years, businesses in the UK may take note of luxury items also making the top five. This shows there is a demand directly from the consumers for luxury items, including jewellery and cars. Any luxury brand can take this as an encouraging sign that the GCC market could be very valuable to them.
"This could have massive implications for businesses based in either the UK or the GCC countries, with new opportunities being presented and markets expanding."
Top products imported to the UK from the GCC countries include oil derivatives (5.5 billion dollars), medium power generators (2.2 billion dollars) and gas (1.3 billion dollars). This is also a predictable result, but is expected to change in the coming years, with many GCC countries focusing on diversifying their exports through initiatives like Saudi Arabia’s Vision 2030.
In regard to services, including financial services and tourism, the UK has exported about 14 billion dollars to the GCC countries, and imported 6.1 billion dollars of services from the Gulf region. Tourism in particular has been given special attention from the British government, with the government recently announcing as of 2023, visitors from the GCC countries will no longer need a visa to visit the UK. In the meantime, they have now introduced an online visa waiver programme, just in time for the summer months, when many tourists from the GCC countries make their way to the UK.
Currently Qatar, the UAE and Saudi Arabia are the top investors in the UK in the region, but six GCC countries are involved in negotiations over opening a free trade agreement with the UK.
"Trade exchanges between the GCC countries and the United Kingdom increased steadily between 2010 and 2019, reaching £41 billion"
Qatar
Qatar is one of the largest non-European investors in the UK, with the country being the first major destination for Qatari investments. Direct investments in the UK from Qatar amount to approximately 43 billion dollars. The volume of trade exchange between the two countries to 5.8 billion dollars, of which 3.2 billion were imported to Qatar, and 2.6 billion were exported from Qatar.
UAE
The UAE was the UK’s first trading partner from among the GCC countries. It is now ranked as the 24th trading partner of the UK, with trade exchanges between the countries constituting 1% of the total trade exchanges of the UK.
The total volume of trade between the UAE and UK is about 16 billion dollars, with the UAE importing a total of 10 billion dollars from the UK and exporting a total of 6 billion dollars. In 2020, British investments in the UAE amounted to 9 billion dollars, and UAE’s investments in the UK amounted to 14.9 billion.
Saudi Arabia
The Kingdom of Saudi Arabia is currently ranked as the 27th partner of the United Kingdom, with the volume of exchange between them accounting for 0.9% of the total trade exchanges of the UK.
Trade between the two countries is valued at more than 13 billion dollars, of which 10.6 billion dollars are imported to Saudi Arabia from the UK and 2.8 billion dollars are exported to the UK. In 2020, British investments into Saudi Arabia amounted to 6.7 billion dollars and Saudi Arabia invested 1.2 billion dollars in the United Kingdom.
In 2018, the two countries signed a Memorandum of Understanding, pledging trade exchanges and mutual investments that amounted to about 79 million dollars.
Conclusion
According to estimates by the British Department for International Trade, the trade demand for the GCC countries will reach 270 billion dollars by 2035. According to the same source, the UK could increase its share of exports to these countries by 6% in reference to what it exported in 2020, an increase of up to 30 billion dollars.
This could see massive opportunities arising for British businesses looking to expand into the GCC countries. New trade agreements could give them the chance to begin exporting products to the region or begin establishing bases there.
However, in order to be successful with this, the companies and employees must first be aware of Arab culture and how to do business within the GCC countries. If they invest sufficiently in doing so, they are sure to see massive returns. Luxury brands and any company or organisation that can market towards tourists will feel the direct effects of the government’s efforts this summer when the peak travel season begins.
Reinvest in your business to get the most out of the changing trade landscape and new markets available to you, by training your employees and yourself to understand the GCC countries and how to successfully do business with them.
If you are looking to help your business transition to make the most of these new opportunities, we are here to help with London Arabia’s Trust Me, I’m an Arab Cultural Awareness Training programme. This programme is customised entirely to your business, to help understand the GCC countries and the growing market available there.
For more information or to register for a free consultation, email allison@londonarabia.com or visit our website at https://www.londonarabia.co.uk/middleeastculturalawarenesstraining.