Britain’s departure from the European Union means that it must negotiate trade arrangements with states around the world. With the UK rethinking its strategic relationships with many of its closest allies, it is worth considering how this complex process will impact Britain’s ties with the Arab world and particularly states in the Gulf region.
The GCC is hugely important to the British economy, constituting the UK’s fourth largest non-EU export market. Meanwhile the UK is the third-largest foreign investor in the GCC (after the US and China). London has also been a principal destination direct foreign investment from GCC states.
While some global investors and multinational companies previously invested in London because of its proximity to EU markets, GCC investors were habitually attracted by “Brand Britain” in its own right. In consequence, there is less concern that GCC investments in the UK will be adversely impacted by Brexit. Indeed, a weakened pound has acted as an incentive for GCC citizens visiting the UK and making luxury purchases.
Prior to Brexit, a third of the GCC’s trade with EU states (totaling $161.6bn) was specificallywith the UK (totaling $47bn). Meanwhile, most of Britain’s trade with Middle Eastern states is focused on GCC nations – $50.83bn of Britain’s total $57.19bn Middle Eastern trade.
British ministers have been regularly making visits to GCC states to discuss boosting bilateral investment, and post-Brexit trade arrangements for some time. For example, in 2018 the UK and Saudi Arabia reached a deal valued at £65bn in trade and investment. However, only with the UK’s formal departure from the EU on 31 January 2020 can formal talks begin.
UAE Economy Minister Sultan bin Saeed al-Mansouri recently stressed the importance of trade arrangements with post-Brexit Britain, but acknowledged that such agreements could take years to negotiate. Indeed, the European Union has been trying to negotiate a free-trade agreement with the GCC since 1988!
British ministers and experts have noted the importance of investment plans such as Saudi Arabia’s Vision 2030, Bahrain’s Vision 2030, and Kuwait’s Vision 2035 for upscaling relationships between UK firms and the GCC; in particular offering opportunities for British services and expertise. Sales to GCC states represent around 80% of Britain’s £14bn total defence exports.
The UK exported £6bn worth of goods and services to Saudi Arabia in 2018. Trade between Britain and the UAE reached £17.5bn in 2017, with both sides aiming to boost this to £25bn in 2020.
Kuwait’s bilateral trade with the UK in 2018 was around £3bn; comparing with £5.3bn between Britain and Qatar; £2.8bn for Oman and £1.1bn for Bahrain.
Most of these states have seen sharp increases in trade with Britain over the past decade. The UK’s trade volume with the GCC increased from $19.1bn in 2010, to $44.5bn in 2016.
Aside from trade, Britain must also give consideration to its foreign policies and defence relationships. Prime Minister Boris Johnson on several key issues appears to be aligning himself more closely with US policies; for example, taking a more hawkish line on Iran. It waits to be seen whether this means Britain participating in US-led patrols in Gulf waters to protect regional shipping from Iranian threats.
There is little to suggest that Brexit with have a radical impact on Britain-GCC relations, beyond acting as an incentive for Britain to strengthen its trade ties with the region. Likewise, although many GCC citizens may take advantage of a weakened pound, now that fears have receded (at least for the time being) about the potentially damaging worldwide impact of a no-deal Brexit, there appears to be a few major causes for concern from a GCC perspective.