£3.7bn boost boosts British SMEs as Britain becomes first G7 country to sign GCC deal
After more than five years of tough negotiations in all six capitals, Britain has finally secured its long-awaited free trade deal with the Gulf Cooperation Council, a deal ministers say will add £3.7 billion a year to the economy and put UK exporters at the front of the queue in one of the world’s fastest growing regions.
The agreement, which affects Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain and Oman, makes the UK the first G7 country to sign a comprehensive free trade agreement with the bloc. It is the fifth major deal secured by Sir Keir Starmer’s government, following deals with India, the United States, South Korea and a reset with the European Union.
For small and medium-sized British exporters, the long-term importance of reading the magazine, the prize is obvious. Tariffs will be removed from many UK goods including cheddar, chocolate, butter, cereals, medical equipment and luxury cars. A summary of the government’s conclusion estimates that £580 million of jobs will be lost each year once the deal is in full force, with £360 million lost on day one.
Bilateral trade between the UK and the GCC is already £57 billion annually. Whitehall modeling suggests the deal could increase that figure by 20 per cent, boost real wages by £1.9 billion and increase UK GDP by around 0.1 per cent over time. Combined with last year’s India deal, the two deals are expected to add more than $8 billion a year to the economy by 2040.
A rare piece of good Treasury news
The deal comes at a politically opportune time. With growth still sluggish and inflation stubbornly above target, ministers have been on the hunt for a credible win to support businesses. Starmer, who has spent months pursuing the deal in Doha and Riyadh, called it a “huge win for British business” and said working people would feel the benefits “for years to come with higher wages and more opportunities”.
That language is in line with the prime minister’s previous push to use the Gulf deal as a vehicle to rebuild Britain’s image as a key trading partner after the bruising Brexit and post-pandemic slump in exports.
Peter Kyle, the business and trade secretary, said the deal sent a “clear signal of confidence” at a time of global trade uncertainty. “In order for this government to face the challenges our country is facing, the growing revolution will not stop,” he said. “Major trade deals like this are critical to continuing the call for long-term, sustainable economic growth with benefits that people and businesses can see and feel.”
What it means for SMEs
The opportunity is heavily skewed toward small exporters. The Gulf states import more than 80 percent of their food, which puts British producers of milk, confectionery, baked goods and beverages at the forefront. Carmakers, especially luxury brands such as Bentley, Jaguar and Aston Martin, could also benefit from the exemption from the tax on cars, where rates usually remain at 5 percent.
Services, which account for around 80 per cent of the UK economy and more than half of British exports to the GCC, will benefit from guaranteed market access. The government expects the deal will make it easier for British lawyers, engineers, architects and management consultants to travel, work and live in the region. More than 400,000 business visits from the UK to the Middle East by 2024.
Most importantly, the deal opens up a market where UK Export Finance has been quietly busy. As Business Matters previously reported, UKEF recently funded Saudi Arabia’s £2.3m export contract for Hertfordshire-based Masters Specialty Pharma, the kind of deal the Gulf deal is designed to replicate.
The British Chambers of Commerce welcomed the deal with unusual warmth. William Bain, the BCC’s head of trade policy, said the deal was “good news for the UK economy” and would “open up new opportunities for inward investment, exports and supply chains”.
“There is huge potential to increase our trade with this important region, which already generates £57 billion a year for the UK economy,” he said. “Achieving long-term economic benefits with close trading partners, such as the GCC, is vital for tens of thousands of UK firms with high export growth ambitions.”
A breakdown of the benefits by the Department of Business and Trade shows manufacturing, financial services, professional services and food and drink as the four sectors to benefit the most, with detailed tax schedules covering thousands of product lines.
Strategic statistics
Beyond the immediate cost savings, the ministers bet on a deep strategic change underway in the Gulf. Saudi Arabia’s Vision 2030, the UAE’s industrial diversification plan and Qatar’s push into financial and digital services all point in the same direction: away from oil dependence and towards a regional economy built on transport, tourism, technology and capital markets. By moving first among the G7, the UK is positioning itself as the preferred Western partner for that transition.
Negotiations were complicated by the need to reconcile the often divergent economic interests of the six GCC members. That the Department of Business and Trade managed to strike a deal before Washington, Berlin, Paris or Tokyo would be seen in Whitehall as a logical coup.
For British exporters, and especially SMEs this magazine has long argued are the engine room of the UK economy, the active question now is implementation. The agreement is not yet in force; the UK and all six GCC members must complete domestic verification procedures. But with £360 million of tax savings to follow on day one, the smart money is already on UK companies moving quickly to register, certify and ship.
