Brexit Britain Eyes Russia as Non-EU Investment Market

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As I pointed out over on our China Briefing portal earlier this week, there are some interesting developments concerning how British businesses are adapting to a divorce between the UK and European Union. With Brexit poised to happen next March, and the danger of a no deal with Brussels becoming increasingly likely, British businesses are voting with their investment finance over which alternative markets they see as potentially viable.

In China’s case, this has meant a staggering increase of 169% of British foreign direct investment into China in the first nine months of the year. A UK-China trade deal would be one of the first things Britain would look at in the event of Brexit. That is in contrast with the EU, who have been negotiating with China over such a deal since 2013, but with no progress.

But British business is looking at other markets too. One of them, despite the political coldness between London and Moscow, is the Russian market. The latest data from Moscow shows that Russia ranked 1st out of UK’s top 40 trading partners for growth in trade turnover between January and August 2018, with Russia-UK trade turnover hitting $6.9 billion for the period January – June this year, representing a 20% growth year-on-year.

While the constant negative media coverage, recent scandals and sanctions have undoubtedly damaged investment sentiment into Russia, the facts are clear – Russia is being seen as a growth market for British business.

There are reasons for this: British businesses looking for new, non-EU markets in light of Brexit being one of them. Yet Russia is also relatively close, has a huge consumer market in its own right, and by way of sanctions also has huge pent up consumer demand. Add in the low state of the ruble against the British pound and Russia can be seen increasingly as a bargain market to invest in.

Its an old adage that following emerging trends is a good way to prosper. It may not be politically correct to be championing Russia as an investment destination, but British business is taking the plunge.  As I pointed out recently, before sanctions, Russia imported gourmet foods. Now they are making their own. These are new investment trends, and British businesses would be well advised to consider the potential.

 

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Dezan Shira & Associates provide professional services to international companies in Asia, including corporate formation and related services. Please contact us at russia@dezshira.com or visit us at www.dezshira.com

 

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