Policy paper

United Kingdom - Gulf Cooperation Council Joint Trade and Investment Review: executive summary (June 2021)

Published 30 June 2021

This was published under the 2019 to 2022 Johnson Conservative government

The rationale for the joint trade and investment review

1. The United Kingdom of Great Britain and Northern Ireland and the countries of the Cooperation Council of the Arab States of the Gulf share a relationship that dates back centuries, and is as broad as it is deep. It is a relationship that over the years has evolved and strengthened into the modern partnership it is today. We are significant trading partners, with the countries of the Gulf Cooperation Council being the third largest export destination of the United Kingdom outside of European markets in 2019. Bilateral trade in goods and services amounted to £41.4 billion in 2019^{[footnote 1]}.

2. For the first time in more than forty years the United Kingdom is master of a fully independent trade policy. Having left the European Union, and with each of the Gulf Cooperation Council countries delivering their economic diversification and Vision Plans, now is the moment for the United Kingdom and the Gulf Cooperation Council to build on their shared history and deep friendships to develop even closer economic ties, boosting trade and investment further still.

3. As the world emerges from the coronavirus (Covid-19) pandemic we must look to the future and ensure we build back better. One of the steps to delivering on that is developing a deeper and stronger trade and investment relationship between the United Kingdom and each of the countries that constitute the Gulf Cooperation Council: the Kingdom of Bahrain, the State of Kuwait, the Sultanate of Oman, the State of Qatar, the Kingdom of Saudi Arabia, and the United Arab Emirates.

4. In June 2020 the Secretary General of the Gulf Cooperation Council, H.E. Dr. Nayef Falah M. Al-Hajraf, and Minister for International Trade of the United Kingdom, Ranil Jayawardena, M.P., discussed the principles of undertaking a Joint Trade and Investment Review (JTIR). The review was quickly launched with the ambition that it would provide a platform for strategic dialogue to advance the relationship over both the short and long-term, and provide a comprehensive understanding of bilateral trade and investment flows. The review was to be completed within a year and aimed to examine key sectors of interest and opportunities to enhance bilateral trade and investment through the identification of market access barriers which prevent British and Gulf businesses operating as effectively as possible in each others markets.

5. The review was completed within the year, in June 2021, with its findings and conclusions based on empirical analysis and engagement with businesses operating in the United Kingdom and across the Gulf Cooperation Council countries. Hundreds of companies and trade organisations were consulted in order to create a joint report and recommendations for enhanced trade and investment.

6. The economies of the United Kingdom and the Gulf Cooperation Council complement each other to a significant extent and there is great scope for collaboration. The United Kingdom is the world’s second largest exporter of services, and these are in high demand across the Gulf where countries are implementing Vision Plans to diversify their economies away from oil and gas, and enhance the capability and capacity of the private sector to drive economic growth^{[footnote 2]}.

7. The Vision Plans of the Gulf Cooperation Council countries highlight areas for future economic growth which overlap with sectors where the United Kingdom is a world leader: technology, cyber, life sciences, creative industries and education, in addition to Artificial Intelligence (AI), financial services and renewable energy.

Economic analysis

8. The United Kingdom’s Department for International Trade and the Gulf Cooperation Council Secretariat undertook empirical economic analysis of the current trade and investment relationship between both markets. The trade flow statistics presented below are based on the period for 2019^{[footnote 3]}.

9. Goods trade. Total trade in goods between both markets totalled £24.5 billion in 2019, and exhibited a positive degree of complementarity. This means that the types of goods which both markets export to one another are mostly concentrated in different sectors. This was echoed by analysis of Revealed Comparative Advantage which indicated that Gulf countries are specialised in areas such as natural resource extraction, petrochemicals, aluminium, as well as other manufacturing sectors. In comparison, the United Kingdom specialises in producing transport equipment, pharmaceuticals and beverages^{[footnote 4]}.

10. Services trade. Total trade in services between both markets totalled £16.9 billion in 2019^{[footnote 5]}. The Gulf is an important market for United Kingdom trade in services, ranking as the seventh largest destination of United Kingdom services exports in 2019. Of all the United Kingdom’s exports to the Gulf Cooperation Council in 2019, 43.2% (£11.3 billion) were services while 56.8% (£14.8 billion) were goods^{[footnote 6]}. The value of United Kingdom services exports to the Gulf have grown over the past decade reaching £11.3 billion in 2019 and are dominated by professional and management consulting services, travel, and financial and insurance services^{[footnote 7]}. Gulf Cooperation Council services exports to the United Kingdom have also grown over the past ten years, totalling £5.6 billion in 2019^{[footnote 8]}.

11. Investment. Gulf Foreign Direct Investment (FDI) in the United Kingdom is not dominated by a single sector and is diversified. Investment in hotels and tourism projects accounted for the largest share (19%) of the FDI projects in the United Kingdom over the period 2010-2019, and was followed by transportation and warehousing (16%) and financial services (13%). United Kingdom FDI stocks in the Gulf Cooperation Council are dominated by business and financial services. These two sectors alone accounted for more than 50% of investment projects in the United Kingdom between 2010-2019^{[footnote 9]}.

Next steps and future opportunities

12. As a result of extensive business engagement, the review identified a range of priority sectors for future British-Gulf collaboration. With the review now complete the United Kingdom and Gulf Cooperation Council have agreed to enhance government-to-government cooperation to facilitate greater market access in the following sectors: professional and business services; agriculture, food and drink; education; healthcare and life sciences; financial services; as well as environmental green technologies and renewable energy. This work will involve the establishment of new specialised government-to-government trade dialogues to maintain communication on market access delivery. It was also agreed to expand cooperation on cross cutting issues such Intellectual Property (IP) and to increase collaboration on emerging sectors such as FinTech.

13. With the review now complete rapid steps will be taken to deliver the findings drawing on the wealth of information and insights provided by our businesses. Both the United Kingdom and Gulf Cooperation Council are united in their desire for swift progress to realise the market access opportunities and make sure that a closer and deeper trade and investment relationship becomes a reality. The opportunities are truly vast.

1. ONS, UK total trade: all countries, non-seasonally adjusted: October to December 2020. ↩

2. ITC Trade Map, 2019 data. ↩

3. Data are available for trade in 2020 and early 2021. 2019 data has been used as the reference period because of coronavirus-related impacts on the United Kingdom and many of its trading partners affecting 2020 and 2021 trade flows. ↩

4. Revealed comparative advantage measures are used to provide an indication of a country’s competitive export strengths. Measures which affect competitiveness such as tariffs, non-tariff measures, subsidies and others are not taken into account in the RCA metric. ↩

5. ONS, UK total trade: all countries, non-seasonally adjusted: October to December 2020. For reference services trade was £13.6 billion in 2020. ↩

6. Trade - ONS, UK total trade: all countries, non-seasonally adjusted: October to December 2020. ↩

7. ONS, UK trade in services: service type by partner country, non-seasonally adjusted (2020, Q4). Services are categorised on EBOPS 2010 basis. Professional and management consulting services are captured in services trade statistics under the classification ‘Other business services’. A sectoral breakdown of the United Kingdom’s trade in services data for the GCC countries is only available for Saudi Arabia. ↩

8. Trade - ONS, UK total trade: all countries, non-seasonally adjusted: October to December 2020. ↩

9. fDi Markets is an online database from the Financial Times providing a partial view of crossborder greenfield investments. ↩