#TradeTuesday: Truss Talking Trade… Again

By Tom Haynes

After what has been a hugely dramatic few weeks for UK, with a change in Government and the sad passing away of the late Queen Elizabeth, it is straight back to work for the Prime Minister, as she heads to New York for the UN General Assembly. One of the major post Brexit wins for the UK was going to be a bespoke trade deal with the USA, but speaking to journalists on her flight over last night, the PM made it very clear that such a trade deal had been kicked into the long grass and there was no expectation of talks starting soon. While this may be disappointing news for many of those holding out for a UK-US trade deal, this is not all bad news from the perspective of British trade.

The new Prime Minister is due to have her first bilateral meeting with President Biden and said that global security is her “number one issue” for discussion. The new leadership in the UK, combined with the increasing focus on international peace and security, will present the UK with fresh opportunities. 

Looking first to CPTTP, where the UK wish to conclude negotiations by the end of the year, the Asia Pacific market represents around 8% of UK defence exports. Further integrated trading, combined with security relationships like the AUKUS Pact, could see the way for much more integrated trade, in addition to interoperability. This could range between anything from new nuclear submarines for the Australian Royal Navy, all the way to modified British combat uniforms for New Zealand soldiers. The previous deal Australia had with France for Submarines represented $90 billion, funding which could be redirected to the UK and UK employees. In the last year alone 17,700 Defence jobs were supported through direct spending with UK industry in the North West, something which could be ramped up with further external investments, and securing these manufacturing capabilities in the UK. 

A further top target is the Gulf Cooperation Council (GCC), where the Middle East represents 60% of UK defence exports and is a region that King Charles has fostered positive relations with over many years. While there are obvious considerations that need to be made when trading in the security space, the UK’s exports of military goods to Saudi Arabia alone represents £1.47 billion, a vital contribution to the UK’s economy, sovereign capabilities and trade portfolio. When we consider the Trend Indicator Value (TIV), a metric produced by the Stockholm International Peace Research Institute (SIPRI) to reflect the military capability rather than the financial value of a product, the UK only represents 7% of Saudi Arabia’s arms imports. 

When we consider the broader contextual narrative, whereby the new UK Government have committed to increase defence spending to 3% of GDP and maintain or increase the levels of support to Ukraine, as well as the global narrative for international security, it is clear that fresh investment in the defence and security is on the rise. 

The UK’s commitments to defence spending will mean fresh investment and the possible expansion of armed forces capabilities. If the UK wish to maintain these manufacturing and technological capabilities in the UK, they need to be looking to new export markets as well as just servicing our domestic needs.