By: Richie Santosdiaz, London-based economic development expert
There are strong economic prospects both the UK and the Middle East can benefit from each other in a post-Brexit world. This was clear this year when UK Prime Minister Theresa May visited the region to solidify the UK and Saudi’s historical and current relationship. In fact, Theresa May is back in the region again. However, much can be done to leverage the Middle East as a whole, which might even include having future free trade agreements. Also, there can be more to diversify travel, which much in the media has been focused on the controversial arms trade the UK does in the region.
Why the Middle East? First off, the area has a population of almost 400 million people. Second, the region has a long history with the British. In fact, the term the “Middle East” might have actually been created by the British in the 1850s, later widely known when American naval strategist Alfred Thayer Mahan used the term in 1902s. Much of the region was under the administration by the British, which formed part of the wider British Empire. Although it isn’t the best memory the British have left in the region, nevertheless it is has been a part of history.
Finally, the region, in particular the Gulf countries such as the United Arab Emirates (UAE), also is home to sizable expatriate communities of various nationalities such as Brits and Americans. With the former, there are 250,000 living in the UAE alone. Not just with expats but also with foreign direct investment (FDI), the region is home to countless British investment. This includes the likes of large British multinationals and smaller companies who have expanded in the region. From finance to food to professional services and logistics, British expertise can be felt in the region with branch and regional offices scattered throughout the Middle East. One can walk around in cities like Dubai and see recognizable British brands such as seeing Waitrose, HSBC and Costa Coffee.
According to the UK’s Department for International Trade, over 6000 UK companies actively export to Saudi Arabia. The UK is the second largest cumulative investor in Saudi Arabia after the US; there are around 200 UK/Saudi joint ventures with total investment estimated at approximately US $17.5bn. In the UAE, just in Dubai alone, there are over 5,000 UK companies with a presence there.
The UK should be using its freedom post-Brexit to use its strong ties to the Middle East to forge stronger relations, one of which can include a free trade agreement with at least some in the region. For instance, the United States currently has free trade agreements with GCC countries like Bahrain and Oman. The UK, given its strong historical ties to the region and current relationship with the region, will have an advantage in potentially forging any future free trade agreement.
The Middle East can be used as a way to help diversify UK companies in offsetting Brexit. Like the rest of the developed world, the UK brings with it expertise, knowledge and innovation that has made its economy successful. While much of the Middle East generally has achieved much economic success, there is much more that needs to be done to create sustainable and diverse economies. For instance, Dubai has achieved much success as placing itself as a global contender as far a global attractiveness for both businesses and individuals. However, with the former, has its potential being a global alpha city (which only New York City and London currently obtain as far as globalness) been reached? Many argue against and this is reflective in its current FDI flows.
Generally, has much of FDI into Dubai been actual FDI or merely just offices catering to hqs in the UK and the USA? Brexit can be an interesting opportunity to not only increase investment opportunities from the UK to cities in the Middle East like Dubai but also, more significantly, to ramp up and encourage more knowledge intensive and innovative knowhow in the region. Many use the UK, both native and also foreign entities, as a gateway to Europe and beyond. This in many cases making the UK, in particular London, the office for EMEA (Europe, Middle East and North Africa) — so why not increase more flows to the Middle East post Brexit? Especially if the UK has a hard Brexit and the Middle East can not only open up a market of nearly 400 million people but also spread the risk. At present, with respect to international trade from the UK to the UAE, according to the Department for International Trade UK, around 50% of UK goods are re-exported to a regional MENA market worth over £150bn. Also, the UAE is the UK’s 11th largest trading partner.
The UK can continue to be a gateway to Europe for the Middle East. For those that have been to London it is clear to see the influence of the wealth the Middle East has brought, in particular the Gulf. This is reflective in many iconic British brands that have been wholly or partially acquired by the Middle East. For instance, Qatar has in its portfolio British Airways’s parent company IAG, Harrods and Western Europe’s tallest tower the Shard. Even walking around London’s most exclusive and richest areas of Kensington and Mayfair can see regularly tourists from Gulf countries like Saudi Arabia and the United Arab Emirates.
Brexit probably might not discourage Arab money coming to the UK but much from the part of the UK should be done strategically to make sure they are placed to be still the gateway to Europe post Brexit. The UK is at a pivotal moment to maximize its future for Arabs from the Middle East to maintain its status as a gateway to Europe and beyond.
Let us not forget that generally much of the Middle East, particularly Gulf countries such as Saudi Arabia, are also undergoing their own changes never before seen. For the UK in a post Brexit world to benefit and thrive, it must access and utilize its network; the Middle East is naturally one they should leverage.