The UK and Saudi Arabia have long cultivated strong ties. A bilateral trade relationship represents trade in goods and services between the two of a significant £17.6 billion for the 12 months to the end of Q1 of 2024.* Crucially, the Saudi government is investing billions into the UK economy through the Saudi sovereign wealth fund – the PIF.
This relationship now matters more than ever as the new UK government seeks to drive economic growth, boost foreign trade and foster stability abroad. Sir Keir Starmer’s new Labour government has a real opportunity to build on the progress made by its predecessors.
In 2018, Theresa May’s Conservative government established a new Strategic Partnership Council with Saudi Arabia to “boost economic relations in several fields”, strengthen bilateral relations and enhance strategic cooperation.”
Meanwhile, in May 2024, the former British Deputy Prime Minister, Oliver Dowden, led a group of 400 UK companies – from large multi-nationals to SMEs – to attend a government-sponsored ‘Great Futures’ summit in Riyadh.
Lord Dominic Johnson of Lainston, Minister for Investment in Rishi Sunak’s government, who accompanied Dowden, said they “wanted to show the Saudi government that the UK was their partner when it came to commercial investment.” He emphasised that “Real opportunities came out of the summit – partnerships on the ground, orders, contracts and activity”.
During the summit, the Council’s committee announced its intention to increase bilateral trade between the two Kingdoms to £30 billion by 2030. If fulfilled, this ambition would potentially turn Saudi Arabia into one of the UK’s top-10 export markets.
Sunak’s government also made significant strides towards securing a free trade agreement with the Gulf Cooperation Council (GCC). Yet after six rounds of negotiations, it was unable to get a trade deal over the line.
So, why hasn’t a comprehensive trade deal been realised yet? Partly, it’s timing. July’s UK general election sapped momentum, forcing the Sunak government to shelve negotiations while it focused on the election.
However, with a new government, the UK could now move to quickly strike a deal.
Lord Johnson points out: “there is minimal friction on trade” and that “friction areas” on agriculture, which have plagued the UK’s negotiations with Canada and India, “don’t exist.” Instead, Saudi Arabia and the wider GCC “are a net purchaser or desirer of our products.” His advice to his successors in the new government? “They’ve got a clear five-year mandate. My view is get on and do it (a trade deal): it will only benefit the UK citizen.”
It is understood outstanding issues involve complicated but resolvable issues as business regulations, technology sharing, data protection and the mutual recognition of professional qualifications. Although it will take time to coordinate with the six GCC countries to get a comprehensive free trade agreement over the line, a deal is there for the taking should the UK government want it.
At a time when Saudi Arabia is seeking to diversify away from oil, invest in vast infrastructural giga-projects and recruit international companies to help create a new services economy, British firms are well positioned to provide expertise. This extends beyond financial services to areas such as media, education, legal services and technology – all in which British companies have a competitive edge and are already doing business in the Saudi market.
Beyond striking a trade deal, there are many other areas in which the UK could profit from encouraging closer economic ties with Saudi Arabia. British investors, for instance, could benefit from greater involvement in the Kingdom’s expanding capital markets.
On this front, the Saudi government has recently renewed its efforts to attract more international investment and enhance transparency. In August, the Saudi Ministry of Investment announced a new investment law which seeks to strengthen investor confidence. New regulations aim to ensure that foreign investors are treated fairly under the rule of law, make it easier for them to transfer funds and simplify the registration process to invest their capital.
Trade, investments and expertise flow both ways, of course. At April’s World Economic Forum conference in Riyadh, Michael Mainelli, the Lord Mayor of the City of London, said he anticipates “a tremendous amount of Saudi investment in science and technology, particularly in areas like hydrogen, where Saudi is very strong, but also in desalination and biotech.”
The UK’s Northeast has benefited particularly from Saudi investments. Saudi state petrochemicals company, SABIC, already operates two manufacturing, storage and logistics sites in Teesside. And, earlier this year, the Saudi government announced it would invest £3 billion here and create 2,000 jobs.
In conclusion, the Saudis’ ability to fund large infrastructure projects will prove vital to a British government which says it is serious about creating jobs, generating growth and boosting productivity.
A more detailed report will be available on www.insidesaudi.media soon.
*Source: UK Department for Business & Trade (18 October 2024).