What will the Brexit result mean for the historic Gulf friendship?

Gulf pundits and investors watch nervously as the UK lurches from crisis to crisis
What will the Brexit result mean for the historic Gulf friendship?
A free trade agreement (FTA) between the EU and the GCC was proposed in 1998, but has since never materialised.
By Alicia Buller
Sun 31 Mar 2019 02:31 PM

The UK’s Brexit plan was thrown into further chaos on Friday as MPs rejected Theresa May’s third attempt at the EU withdrawal agreement.

The result of the vote means Britain has missed an EU deadline to secure an extension of the Brexit process and leave with a deal on May 22 – raising the likelihood of a ‘no deal’ or general election scenario.

Middle East pundits and investors remain on tenterhooks as the Brexit process lurches from one crisis to another.

Chris Doyle, director of London-based Council for Arab-British Understanding (Cabbu), said the manner in which the UK leaves the EU would be a critical factor for determining the future of the GCC-UK relationship.

“If Britain leaves the EU on good terms with a deal, it means that a large part of its trade will remain with the EU.

“However, if the UK crashes out and there is bad blood, then it will be even more likely to be looking at other markets, such as the GCC,” Doyle told Arabian Business.


According to UK government data, UK exports to the EU in 2017 were £274 billion, accounting for 44 per cent of all UK exports. UK imports from the EU were £341 billion, 53 per cent of all UK imports.

Doyle said it’s possible the UK and the GCC could become ‘closer’ once Brexit is finally put to bed.

He said: “Britain may start putting more effort into relationships with other areas of the world – those are that are non-US and non-EU. This is not just because of the Brexit situation but because the relationship with the US is awkward at the moment.

“Though Britain wishes to have strong relations with the US, the current White House administration means it’s not easy.”

New beginnings?

A free trade agreement (FTA) between the EU and the GCC was proposed in 1998, but has since never materialised.

According to M R Raghu, head of research, Kuwait Financial Centre ‘Markaz’, a no-deal Brexit outcome could spur the UK to ‘capitalise on the current opportunity for an FTA with the GCC’.

With current trade between the GCC and the UK standing at around $50 billion, the bilateral gains for both countries could be substantial, Raghu said.

“In all probability, UK companies could push hard for an FTA with the GCC regional bloc. Sectors that would work bilaterally include defence, financial services, construction healthcare, education and emerging areas such as AI and life sciences,” he added.

Doyle said that a ‘no deal’ scenario could free Britain up to have an agreement of its own with the GCC, but with the current Gulf political divisions, it’s more likely to be agreement with the individual states than with the collective bloc.

Come what may, the UK-GCC relationship will probably survive the battering of the Brexit storm, Doyle said.

“Britain was the dominant power in the GCC for many decades and its protectorate. The UK has economic and cultural interests there, it has well over 100,000 British citizens in Dubai alone, so I don’t see that relationship about to wither on the vine because of Brexit.”

Discussions taking place

Referring to recent UK government representative visits to the GCC, Wes Schwalje, COO of Dubai-based research firm Tahseen Consulting, said that bilateral and multilateral GCC-wide discussions are progressing on FTAs.

“This might see the UK outmanoeuvre its European neighbours, while at the same time offsetting trade losses that might occur from a no-deal Brexit,” Schwalje told Arabian Business.

He said: “If there is an agreement on a UK free trade agreement with the GCC as a trade bloc or a series of bilateral agreements is signed, we are likely to see a significant increase in trade, as well as investment between the UK and GCC.”

However Schwalje warned that Theresa May’s proposal of a new EU customs partnership ‘ties the hands' of the UK in terms of its ability to pursue a more independent trade and investment policy that could be favorable to trade and investment between the UK and GCC.

The Tahseen CEO said: “The UK’s ability to pursue trade deals hinges on whether it leaves the EU customs union – which is a very contentious issue and at the heart of the Brexit debate.

“Theresa May’s proposal would make it impossible for the UK to make trade deals with non-EU countries. The UK would not be able to, for example, lower tariffs on imports from the GCC to promote trade and investment and would likely need to back away from the discussions on the GCC and bilateral trade free trade agreements.”

Uncertain times

Looking further into the future, Cabbu’s Doyle said there is a ‘question mark’ surrounding’ UK-GCC political relations in the coming years.

He said: “If we fast-forward to five years time, what will Britain’s status be in the world then?

“Depending on one’s point of view, Britain could be a more powerful actor and unshackled from the EU – or it could be reduced and marginalised for being some not-that-important island off the coast of the North West coast of European continental mainland.”

Nigel Green, founder and CEO of investment group deVere Group, urged investors mitigate risks amid such an uncertain climate.

Green said: “Whatever happens in the UK parliament with the votes, many question marks remain.

"We don’t know who May’s successor will be – the one who will shape the UK’s future relationship with the EU and global trading partners. We don’t know what their approach will look like.

“This is why to mitigate risks and to take advantage of the potential opportunities the volatility is creating, investors must ensure their portfolios are properly diversified.”

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