The opening of a permanent UK Export Finance office in Dubai is a clear sign of a booming post-Brexit relationship between the UK and the Middle East
As the spectre of Brexit looms, speculation has swirled that the European Union’s loss will be the GCC’s gain. British firms have been eyeing international expansion ahead of the country’s departure from the economic and political bloc for some time, and these closer economic ties are now rapidly becoming a reality. This was underlined by last week’s announcement that Dubai will permanently host a team from UK Export Finance (UKEF), the British government’s export credit agency.
The move – which will make the GCC only the fourth international market to have a dedicated UKEF team after Indonesia, Brazil and Turkey – comes in the wake of UKEF already having financed approximately £2bn ($2.85m) of GCC projects that procured UK exports between April 2016 and April 2017. Notably, this figure represents the largest single allocation of UKEF support to one region in the year.
While significant, according to UKEF this figure is only the beginning. In the UAE alone, UKEF says it will make up to £5bn ($7.12bn) of capacity available to project sponsors, with a separate additional £4bn ($5.69bn) available for projects in Dubai. Elsewhere in the GCC, UKEF has noted it has considerable “market risk appetites”, starting at £750m ($1bn) for Bahrain and £4bn ($5.69bn) on the high end for Kuwait. The entity’s financing options include repayment terms of between two and 10 years, as well as flexible requirements for supported projects and capital market refinancing.
“The GCC has long been a key trading partner for the UK. Now, more than ever, we are witnessing a strong synergy between the UK’s world-class goods and services and the future plans of Gulf nations,” UKEF senior counsellor David Moleshead told Arabian Business last week.
“The decision to establish a dedicated team allows us to further support the remarkable transformational ventures currently underway in this region. We will continue to play a central role in the region’s development.”
Notably for the UK, Moleshead said the move bolsters the country’s “aspiration to become the leading Western hub for Islamic finance”.
In 2015, UKEF become the first export credit agency to develop a guarantee for a sharia-compliant sukuk in the debt capital markets when Emirates wanted to use Islamic finance to fund its purchase of four new Airbus A380s.
“The case was hailed as a new gold standard for sharia-compliant asset finance, widening the options for buyers of UK exports and boosting the UK’s aspiration to become the leading Western hub for Islamic finance,” Moleshead explained.
While UKEF has already supported a number of projects locally – most notably $220m in support for Dubai Arena, a 17,000 seat multipurpose arena contracted to a British construction firm – the establishment of the Dubai office opens the door to significant other opportunities, Moleshead notes.
A number of other UAE projects, including DWTC One Central and Bluewaters, are already benefitting from UK financing.
“While the traditional infrastructure and energy sectors will remain a focus, UKEF is able to provide flexible financing across the Gulf’s diversification agenda – education, healthcare, life science and creative services,” he said. “In fact, increasingly, there isn’t a commercial venture in this part of the world where the UK can’t play a positive part in helping to achieve its ambitions.”
As UKEF begins increasing the levels of support for GCC projects, more British companies will likely eye closer ties with the region, particularly Dubai. A recent survey from the Dubai Multi Commodities Centre (DMCC) – which currently hosts 1,350 British firms of all sizes – found that two-thirds of British firms surveyed (66.5 percent) are actively exploring Dubai as a business location, largely due to its strategic geographical location, business friendly government and because it represents a growing marketplace for commodities, financial services and specialist industries.
“Brexit will help the UK pursue a more open economic policy. We are accelerating relations with more countries around the world and are working extremely well with the UAE across multiple investment domains,” Baroness Rona Fairhead, minister of state for trade and export promotion at the Department for International Trade, said during a November visit to the UAE. “The UAE is the UK’s fourth largest partner outside Europe.... it’s a very significant partner for us.”
Although the specifics of UKEF’s plans are unclear, the future seems bright. The team has now settled in to begin work, and Moleshead said they are “already working on-the-ground with project owners to highlight opportunities to collaborate in priority growth sectors.” For both parties, there is work to be done.