Prime Minister Theresa May is in Bahrain, meeting with leaders of the Gulf Cooperation Council (GCC), spearheading the UK government’s plans to “turbo-charge” trade with this important trading bloc.
In doing so Mrs May has gone into the history books as the first British Prime Minister to attend the annual GCC Summit, and also the first woman.
Unlike the summits that Mrs May will attend in Europe next year, the discussions that she has with Gulf leaders will be uncomplicated and relaxed. Not only is the GCC the UK’s largest foreign investor, it is also its second biggest non-European export market.
The Gulf countries today have embraced the same spirit of global free trade as Britain, and are seeking new opportunities that will raise the prosperity of their people. While European companies stall future investments in the UK until the contours of the Brexit deal are known, Gulf companies are moving ahead.
Mrs May’s visit comes exactly six months after the Brexit referendum and presents a useful milestone to evaluate the impact of the vote on the UK’s international trade and economic performance.
If we focus on business relations with the Kingdom of Saudi Arabia – whose economy represents half of the GCC total – over Brexit’s first “half year”, the results are strong. In 2015, the UK exported more than £7.5bn to Saudi Arabia, a figure that is expected to rise when new trade figures are released next month.
The performance of the FTSE 100 is another cause for optimism. The FTSE 100 includes Britain’s biggest companies, many of which have seen their international work grow, partly on the back of the weak pound.
Large UK companies such as Balfour Beatty, Amec Foster Wheeler, Atkins and Serco have won major contracts in the Kingdom in the construction sector. The big retailers are also here, with Debenhams, Marks and Spencer and Next familiar sights on the Saudi high street. So are British people: there are 40,000 British nationals working in Saudi today, and many more employed in the UK by companies exporting to the Kingdom.
I would expect to see more contracts in Saudi Arabia going to major British companies following Theresa May’s visit to Bahrain.
The City of London is too big and too important not to remain one of the world’s top financial centres along with New York. There have been two Saudi votes of confidence in the City in recent months, the first being the selection of London as headquarters for the SoftBank Vision Fund. It will be the world’s largest at a staggering $100bn, and has been established by SoftBank and Saudi Arabia’s Public Investment Fund.
This was quickly followed by the successful issuance of Saudi’s first Eurobond – the largest ever emerging market bond at $17.5bn – which was booked in London. Many UK and London-based institutions invested in the bond, further cementing the importance of the City ahead of future issuances.
Looking ahead to 2018, much of the advisory work for the IPO of Aramco – set to be the world’s largest at around $500bn – will be handled by London-based investment banks, law firms and corporate communications agencies. Much of the money raised will be in the City too.
The UK has an important advantage over other nations vying for Saudi and Gulf trade, and it is the status of London as the leading “second home” city of Saudi and Gulf citizens. Many thousands have invested in London property, and over Saudi 8,500 students come to study each year, making the UK our largest destination for education.
Consumer spending by GCC citizens matters, and has been an important factor in the summer rise in consumer confidence as tracked by GfK survey results.
With many countries adopting protectionist policies, it is worth asking why Saudi Arabia has chosen to join the UK in becoming a flagbearer for global trade. The answer lies with a radical restructuring of our economy under the National Transformation Plan.
The plan is central to Saudi’s drive to diversify for a post-oil era. To achieve it, British expertise is required, and actively sought, in a number of sectors. Fresh business opportunities will be found in the tech, healthcare, training and financial services sectors, and with them the potential for significant job creation by British companies.
What’s more, trade relations with Saudi Arabia are not subject to the vagaries of EU negotiations. Our chief executives do not need to monitor negotiations in Brussels. This is because Saudi Arabia does business with the UK on a bilateral basis, and not as a gateway to European markets.
Mrs May’s participation in the GCC Summit will bear positive results for the UK and Gulf countries, not only in creating greater prosperity for future generations but also helping to ensure their security. By strengthening this historical partnership, a strong message of hope is sent to the wider world at a time of encroaching protectionism.