As part of plans to expand and diversify its global trade partners and fulfil their respective national development strategies, the GCC has launched negotiations with the UK on a free trade agreement (FTA). This partnership is expected to bolster the bloc’s economy, help attract investment and provide greater opportunities for local businesses.
In June 2022 the two parties signed a joint statement and officially launched talks on a comprehensive trade deal, with Anne-Marie Trevelyan, then the UK trade secretary, meeting with Nayef Falah Al Hajraf, the GCC secretary-general, in Riyadh. Trevelyan then travelled to Dubai to meet with representatives from the six GCC countries: Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the UAE.
Partnership
The talks, which followed months of exploratory discussions, focused on securing an FTA that would reduce or remove tariffs on a series of goods and services. In 2021 annual trade between the GCC and the UK stood at approximately $40bn, a figure which increased to $73bn in 2023, according to the UK government. Furthermore, the newly installed UK government sees a modern-day trade deal as a priority with what would be the new government’s first FTA signed since coming into power in July 2024. The FTA will boost trade by around 16% and improve the UK economy by $2.1bn in the long term as well as delivering marked value to businesses in both the UK and the GCC.
The FTA is expected to be a substantial economic opportunity for the UK-GCC relationship. GCC member states are important partners for the UK, and the bloc as a whole is equivalent to the UK’s seventh-largest export market, and the fourth largest outside of the EU. The GCC’s demand for imported products and services is expected to grow rapidly to £800bn by 2035 – a 35% increase from 2022, creating new businesses and employment opportunities. According to the UK government, the FTA may be followed by GCC countries pursuing individual trade pacts with the UK. The UAE has signed several Comprehensive Economic Partnership Agreements or bilateral deals in recent years which often address trade areas outside of the GCC’s FTAs.
While there is no official timeline for the completion of the deal, both sides are hopeful of securing an agreement before the end of 2025 as some of the final stages of negotiating took place over 2024. Jonathan Reynolds, the UK’s business and trade secretary was in Dubai in November 2024 as part of the UK’s efforts to finish the talks. The first of seven rounds of negotiations, which were conducted virtually, took place between August and September 2022. In this round of deliberations, the UK and GCC discussed their objectives for the FTA and exchanged technical information. Technical discussions were held across 29 policy areas over 33 sessions. More than 100 individuals from UK and GCC government agencies participated in the talks.
Energising Renewables
One area where the deal is expected to have a significant impact is renewable energy. While the GCC’s oil and gas reserves are not likely to be included in the deal, any prospective agreement is expected to help Gulf countries diversify their respective energy sectors and reduce their reliance on hydrocarbons. For example, talks have looked at removing tariffs on renewable energy infrastructure such as UK-made wind turbine parts, and GCC countries would also benefit from greater access to UK clean energy technology, such as innovations that improve energy efficiency in homes, buildings and businesses.
During bilateral talks in March 2022 then-UK Prime Minister Boris Johnson travelled to Saudi Arabia to urge the country to increase its oil production after pledging to phase out imports of Russian oil by the end of 2022. This action underscored the GCC region’s important role in global energy security.
Bolstering Food Security
Free trade talks are expected to yield progress on agricultural imports and food security. Individuals involved in the discussions have flagged the possibility of the GCC reducing or removing tariffs on food and drink imports from the UK, which range from 5% to 25% for various products. In addition to supporting UK farmers, such a deal would help shore up food security in the GCC.
Following the disruption of global supply chains associated with the Covid-19 pandemic and the Russia-Ukraine conflict that began in February 2022, food security has become a more pertinent issue for GCC governments, which has some of the world’s most import-dependent countries. At the beginning of the pandemic countries in the bloc imported around 85% of their food. Almost all rice consumed in the region was imported, as well as some 93% of cereals, approximately 62% of meat and 56% of vegetables. In April 2020 the GCC accepted a Kuwaiti proposal triggered by concerns about pandemic-related trade disruptions to set up special arrangements at border control and Customs, facilitating the movement of basic food and medical supplies within the alliance. While the GCC has reacted to recent events by increasing investment in agri-tech and improving efforts to bolster agricultural self-sufficiency, any agreement making it easier to import food and drink products from outside the GCC could further benefit the bloc’s food security.
Trade Footprint
The launch of free trade talks is a significant step as the GCC seeks to diversify its trade partners and strengthen its position in global trade. In addition to existing free trade deals with New Zealand, Singapore and the European Free Trade Association countries of Iceland, Liechtenstein, Norway and Switzerland, the GCC is in trade negotiations with the EU, Japan, China, South Korea, Australia, Pakistan, India, Turkey and the Southern Common Market member countries of South America. These agreements are expected to play an essential role in attracting foreign investment to the region, as GCC countries embark on transformation strategies to diversify their respective economies.
For example, as part of the country’s long-term economic plans, Saudi Arabia has launched a series of mega-projects that are designed to stimulate economic activity in non-oil sectors, including the $500bn NEOM smart city; the $8bn Qiddiya entertainment city outside Riyadh; and the Red Sea Project, a 34,000-sq-km luxury tourism development.
Bilateral Ties
The launch of trade talks is the culmination of efforts to bolster cooperation between GCC countries and the UK. In January 2022 Oman and the UK signed an agreement to strengthen their already close economic ties. UK companies have a long history of investment in Oman, accounting for around 50% of foreign investment in the country in recent years, according to Oman’s National Centre for Statistics and Information.
“The UK-GCC free trade agreement will deepen the historic business ties we already enjoy with the UK, unlocking significant opportunities for the sultanate’s ambitious business community. It will help enhance our competitive position in the UK market, as well as boost growth across goods, services and investment,” Qais Al Yousef, Oman’s minister of commerce, industry and investment promotion, told OBG. “It will also present opportunities in renewable energy, manufacturing, logistics, tourism, mining, fisheries and education – sectors which are important to the success of Oman Vision 2040 and areas where the UK is a global leader. Indeed, it has the potential to create sustainable, green jobs from Dover to Dhofar. It is an agreement that, when enacted, will be good for Omani workers, businesses and families. A milestone in bilateral relations.”
In March 2022 Saudi Arabia and the UK signed a memorandum of understanding to form a strategic partnership council to bolster bilateral investment and cooperation. With $13.2bn in bilateral trade in 2021 – a 3.9% increase from 2020 – Saudi Arabia is the UK’s largest trading partner in the GCC, accounting for one-third of its business with the bloc.
In May 2022 it was announced that Qatar would invest $12bn in the UK economy between 2022 and 2027 as part of a new strategic investment partnership. The deal, which builds on the £40bn in existing Qatari investment in the country, will focus on sectors such as financial technology, zero-emissions vehicles, life sciences and cybersecurity.
The agreement is similar to a deal that was struck between the UK and the UAE. Signed in March 2021, the UAE-UK Sovereign Investment Partnership will see Mubadala Investment Company, Abu Dhabi’s private investment vehicle, invest £800m in UK life sciences between 2022 and 2027. The partnership significantly expanded in September 2021, with Mubadala committing to invest an additional £10bn in technology and innovation-led sectors such as infrastructure development and energy transition.
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