IT IS obvious that Russia is a significant source of jobs, trade and investment for the UK. But it is also important not to exaggerate these links: while they matter a lot for a few industries, they are less important overall than some commentators assume. It is entirely untrue that London would collapse without Russian money, for instance.
In fact, a close analysis of the statistics reveals that the UK is far less dependent and exposed to Russia than many other economies.
Open Europe has crunched the numbers in a brilliant piece of research. Just 2 per cent of Russia’s stock of foreign direct investment (FDI) is in the UK: 37 per cent has gone to Cyprus, 16 per cent to the Netherlands, 12 per cent to the British Virgin Islands, 3 per cent to Switzerland, 3 per cent to America and 2 per cent to Germany, Luxembourg and the Bahamas.
Of course, the BVI belong to the UK, so there is a close link there; and it is hard to ascertain exactly where Russian money ends up when it exits tax havens, but it is clear that the UK is just one destination of many. The total value of Russian-owned assets held in Britain is £27bn, an astonishingly small 0.5 per cent of total European-owned assets in the country. Do these stats miss some oligarch money? Undoubtedly. But the basic point is correct.
The brutal reality is that Russia trades far more with many other countries, not least Germany, than it does with us. Russia is Germany’s 11th most important trading partner, with the value of commerce put at €76.5bn (£64bn).
Almost a quarter of the EU’s gas comes from Russia, rising to more than a third of Germany’s consumption. The UK doesn’t rely on Russian gas exports at all. Around 16 per cent of Russian exports go to the Netherlands (though much of this is re-shipped globally), 7 per cent to China, 7 per cent to Germany, 7 per cent to Italy, 5 per cent to Ukraine, 4 per cent to Poland and just 3 per cent to the UK and US, the Open Europe analysis of official statistics reveals.
As to Russia’s imports, the biggest source is China at 20 per cent, Germany at 15 per cent, France, Japan and the US at 6 per cent, and the UK and Poland at 3 per cent.
The story gets better: British banks are exposed to the tune of $19.1bn to Russia, lower than those of France, Italy and Germany, all countries that consume a lot of Russian energy. The most stunningly counter-intuitive statistic of all discovered by Open Europe is that just 1 per cent of UK exports of financial, business and insurance services go to Russia – against 37 per cent to the EU, 28 per cent to the US, 6 per cent to Switzerland, 3 per cent to Japan, and 2 per cent to Canada, Singapore and Australia.
Needless to say, the City is exposed to Russia in a number of other ways – including in the flotation, legal and advisory markets – and these figures don’t tell the full picture, but they are nevertheless striking.
What of residential property? Some believe that 2 per cent of buyers of London prime property (a small share of all housing transactions, of course) are Russians; others put the total for all Russian and Commonwealth of Independent States nationals at 9.1 per cent, though roughly half of these live here. It’s an important market but Russians don’t monopolise it.
What about education, a growing source of exports for the UK? Roughly 8.3 per cent of non-British pupils in private schools are Russians. As to automotive, 9.5 per cent of car exports went to Russia last year, a large share of total production. So yes, Russia is an important trading partner for the UK, and a real trade war would be nasty, painful and cost jobs.
But it helps nobody to exaggerate the UK’s reliance on Russian money.