Bahrain-UK Trade Relations: Time for a Change of Gear
by Keith Boyfield*
Zayed Alzayani, Bahrain’s Minister of Industry and Commerce, is confident that a trade deal can be finalised with the United Kingdom (UK) by August 2023. Speaking alongside British trade negotiators at an event hosted in July by the Arab-British Chamber of Commerce (ABCC), the Minister said: ‘We're looking at August next year. So we’re looking at 12 months. We want to push for that. Certainly, the GCC is ready for the challenge.’ This is welcome news to the Conservative government, which has been keen to negotiate a Free Trade Agreement with members of the Gulf Cooperation Council (GCC). Indeed, this is one of the key aims of the administration in terms of its trade agenda. A Free Trade Agreement will enable trade to be conducted on more favourable terms for both Bahrain and the UK. Currently, GCC tariffs average around 5.5% on UK imports.
What Are the Opportunities To Be Reaped?
The British government needs to win some eye-catching trade deals before the next general election in two years’ time. A deal with the GCC could be worth more than £1.6 billion a year and secure many jobs in marginal seats, not least in the North of England, the so called Red Wall. What is more, small and medium sized enterprises in the UK dominate trade in GCC markets — they account for 89% of total UK goods exported to Qatar, Saudi Arabia and the UAE. So winning a better tariff-free or reduced-tariff trading relationship will pay big political dividends to the incumbent governing party in Britain. In 2019, Gulf investment supported over 25,000 jobs in the UK — a figure that tripled over the past decade. Furthermore, UK firms have £13.4 billion invested in GCC economies.
Bahrain’s GDP in 2020 totalled $35 billion. Nearly a fifth of this figure is generated by oil production — in 2020 it contributed 18%. The service sector, notably financial services, dominates the Bahrain economy and accounts for almost three-fifths (58%) of economic output. Manufacturing, on the other hand, accounts for 14% of GDP and hinges on the production of aluminium and petrochemicals.
According to the latest published data for UK-Bahrain trade, Bahrain was the UK’s 85th largest trading partner in 2021. Total UK-Bahrain trade — exports and imports combined — amounted to £889 million in the four quarters to the end of March 2022. Total UK exports to Bahrain amounted to £713 million (an increase of 38.4% or £198 million compared to the previous year) and UK imports from Bahrain amounted to £176 million. Between July 2021-July 2022, UK merchandise exports to Bahrain increased by 24.8% and British imports from Bahrain increased by 373.6% compared to the same period in the previous year. This reflects a recovery in established trading relationships following the prolonged and damaging Covid lockdown. In 2021, the five main categories of goods exported by the UK to Bahrain were jewellery, motor vehicles, aircraft, power generators and miscellaneous electrical goods. In terms of leading imports from Bahrain, the UK bought non-ferrous metals, mainly aluminium and copper, iron and steel, electric motors, miscellaneous metal manufactures and power generators, which were also high on the list of exports to Bahrain.
Services are a bigger money spinner for the British. In 2020, 54.6% of total UK exports to the GCC were in the form of services. The UK’s Strategic Approach to negotiating a Free Trade Agreement with the GCC, the policy brief published by the British government’s Department for International Trade in June 2022, indicates that a successful trade agreement could boost UK exports to the Gulf by £8.7 billion by 2035 in real terms. As this document notes, ‘[t]he UK and GCC economies complement one another, providing an opportunity for an FTA to enhance specialisation in areas of relative strength.’
Trade opportunities are clearly not all about oil. In 2019, the UK imported £4.8 billion in oil from the GCC block. This represented 45.9% of all UK goods imported from the GCC. Yet this figure represents only 10.5% of total trade between the UK and GCC when services are included. In the specific case of Bahrain, the UK imported a total of £53.6 million in refined oil over the twelve months to 31 March 2022.
The Onus Is Now on Britain to Seal a Free Trade Deal
Bandar Reda, the ABCC’s Chief Executive, said a successful conclusion of a UK-GCC free trade agreement would have an ‘impact that resonates’ across wider Arab economies that would benefit from strengthened relations with ‘some of the world’s advanced and dynamic economies.’ The UK’s strategy paper on negotiating a Free Trade Agreement points out that ‘an agreement with the GCC could enhance specialisation in areas of economic complementarity, supporting economic diversification in GCC member states, as well as raising productivity within industries, building upon a strong existing relationship.’
In stark contrast to the lack of specific goals in the European Commission’s recent policy paper, A Strategic Partnership with the Gulf, published in May 2022, the UK’s trade strategy paper on relations with the GCC sets out a detailed plan for negotiating a Free Trade Agreement with Gulf nations. The strategy paper also emphasises the strong cultural, economic and defence ties Britain enjoys with Gulf countries. After all, Britain was essentially a colonial power in Aden, Bahrain, Qatar, Oman and the Emirates for the first half of the 20th century and the de facto currency of the region was the Indian rupee until being replaced in 1959 by the Gulf rupee.
It is also worth highlighting the fact that Gulf citizens, including many prominent citizens of the Kingdom of Bahrain, congregate in London through the summer months. Matters have been greatly helped by the UK government’s decision in June 2022 to enable Bahraini citizens to apply to travel to Britain for tourism, study, medical treatment, or business for up to six months with an electronic visa waiver. This does away with the need to apply for a visa, thereby facilitating travel. It should be emphasised that one of Britain’s biggest attractions are its boarding schools, universities and further education colleges, such as the Sandhurst Military Academy.
In respect of the competition between the UK and EU for trading opportunities in the Gulf region, the gloves are now truly off, as different nations and economic blocks across the globe seek to reach out to GCC countries. There is now all to play for in terms of the UK promoting its offer to Bahrain along with other members of the GCC as policy makers on both sides of the negotiations seek to address the multiple challenges surrounding inflationary pressures, youth unemployment, terrorism, defence security, climate change and the digital revolution. One thing is for sure, things will not remain the same.
24 October 2022
*Keith Boyfield is a Senior Fellow of the Euro Gulf Information Centre.
 Layla Maghribi, ‘Bahrain earmarks August 2023 deadline for UK-GCC trade deal,’ 20 July 2022, https://www.thenationalnews.com/world/uk-news/2022/07/20/bahrain-earmarks-august-2023-deadline-for-uk-gcc-trade-deal/.
 United Kingdom Department for International Trade, ‘UK-Gulf Cooperation Council Free Trade Agreement: The UK’s Strategic Approach,’ 22 June 2022, p. 8, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1084548/uk-gcc-fta-the-uks-strategic-approach.pdf.
 Ibid, p. 35.
 Philip Loft and Antonia Garraway, ‘Bahrain: Introductory Country Profile,’ House of Commons Library Research Briefing, 30 May 2022, p. 2, https://commonslibrary.parliament.uk/research-briefings/cbp-9531/.
 United Kingdom Department for International Trade, ‘Trade & Investment Factsheets: Bahrain,’ 20 September 2022, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1104358/bahrain-trade-and-investment-factsheet-2022-09-20.pdf.
 Ibid, p. 5.
 Philip Loft and Antonia Garraway, ‘Bahrain: Introductory Country Profile,’ p. 3.
 United Kingdom Department for International Trade, ‘UK-Gulf Cooperation Council Free Trade Agreement: The UK’s Strategic Approach.’
 United Kingdom Department for International Trade, ‘Trade & Investment Factsheets: Bahrain.’
 Layla Maghribi, ‘Bahrain earmarks August 2023 deadline for UK-GCC trade deal.’
 United Kingdom Department for International Trade, ‘UK-Gulf Cooperation Council Free Trade Agreement: The UK’s Strategic Approach,’ p. 30.