UK Retains Second Spot in Global Defence Exports, but COVID 19 dents exports to the Middle East Christian Davies, Partner, Keystone Law Middle East LLP

In the same month the UK kicked-off preparations for its GCC trade deal by launching a 14-week consultation, the UK DSE (Defence and Security Exports) published its official statistics on UK Defence and Security Exports. With UK exports to the GCC topping £22 billion and bilateral trade over £30 billion, establishing a trade deal with the GCC outside of the EU constraints is truly an exciting prospect for UK and UAE contractors alike.  From the UK’s perspective, front and centre to the trade discussions will surely be the UK’s defence and security exports where 2020 capped-off off a satisfying decade, albeit with some Covid induced concerns. Our key takeaways from the UK DSE’s annual export report are set out below: 

• on a rolling 10-year basis, the UK retained its position as the World’s second largest Defence exporter with 58% of its exports going to the Middle East;
• the UK’s defence exports remain dominated by aerospace which accounts for 91% of all exports;
• the Middle East is the World’s largest defence importer with $300 billion of imports over the last decade, mainly attributable to the Kingdom of Saudi Arabia, Qatar, the UAE and Kuwait; and
• UK security exports grew to an all-time high of £7.5 billion in 2020 (an increase of £3.3 billion in the last 5 years), placing the UK third for global security exports, just behind China. The security export growth is mostly attributable to the UK’s strong Cyber Security sector, which accounted for £4.2 billion of 2020 security exports. 

Whilst these statistics are encouraging, the impact of the Covid-19 pandemic and Brexit are still in their infancy and close attention will be paid to the 2021 and 2022 reports, to assess the rate of recovery. The current report already contains areas of concern. For instance:

• compared to 2019, the UK’s 2020 defence exports to the Middle East slumped from 57% to 19% of total exports. Whilst the report attributes this to the impact of the Covid-19 pandemic and the price of oil, many nations will continue to divert funds to tackle the pandemic and repay their Covid-19 debts for many years to come; and
• whilst UK security exports are performing strongly (and particularly the cyber security sector), in 2020 only 8% of those exports were to the Middle East.

With the UK/GCC trade deal negotiations commencing in January, many will be hoping that the poor 2020 Middle East defence and security export figures will be consigned to history as a Covid-19 blip. The recently agreed £10 billion UK-UAE Investment Partnership, certainly demonstrates a desire from both nations to work towards a deeper trading relationship, one which we all hope will be borne out in a mutually beneficial trade agreement. 

Author: Christian Davies, Partner, Keystone Law Middle East LLP

Contact: christian.davies@keystonelaw.me

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