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The Middle East: a Brexit solution?

Credit: Billboard
Credit: Billboard
Credit: Billboard

“Your security is our security.” This wasn’t our new Foreign Secretary attempting to woo EU officials into giving Britain a favourable deal on exit from the EU, however. This was Boris Johnson, speaking to a region which has perked the interest of British politicians and business alike: the Middle East.

The Middle East was always of strategic and economic importance to the British during the 19th and 20th centuries. Sitting between the Suez canal and the ‘Jewel’ of the Empire, the Raj, its place on the map was vital. It provided safety for many trading routes and gave the British navy greater reach. However, increasing Arabic nationalist sentiment, a dwindling British budget and the decay of the empire meant that Britain eventually left.

However, Britain has never been able to truly cut the cord. From various military alliances to fighting limited wars, Britain has always lingered although never truly committed. This seems to be changing. With the vote to leave the EU and the appointment of Boris Johnson as Foreign Secretary, British politicians seem to be pivoting toward the Middle East.

The most striking example of this is the opening of a new naval base in Bahrain. While the deal was initially agreed in 2014, it seems to carry a larger importance to British politicians today. British warships sailed through the Straits of Hormuz flanked by American and French boats to mark the opening of the new base, something which some might resemble the old style gun-boat diplomacy. Only seven ships will be stationed there compared to forty from the US, but Mr Johnson has committed an astounding £3 billion to military commitments in the Gulf over the next ten years. The British government, so keen for a good relationship with Bahrain, have even refused to back an UN statement condemning human rights abuses there.

This is a small part of a wider offensive. Britain still sells weapons to the region’s superpower, Saudi Arabia, and still supports coalition airstrikes in Yemen. While many will see this as a distasteful way of gaining support, failing to do so gives way to Russian influence as demonstrated by the situation in Turkey. Britain has also agreed to deploy forces to Oman after they pull out of Germany in 2019 which is a quite literal shift from Europe to the Middle East.

There is a second part to this and it could be argued as the cause and the reason for British overtures to the Middle East. The Middle East is increasingly becoming a vital economic interest for the British and vice versa. While traditionally Britain would focus on selling arms to the various countries, more services and exporters having more luck selling their wares to booming businesses operating from the Middle East.

Big companies have, over the last five years, been establishing themselves within in the region. PWC has a subsidiary in the area which saw its revenue nearly double from 2015 to 2016 to £448 million which represents over 10% of their yearly total revenue. This isn’t exclusive to services either. A recent food exporters event in Dubai also saw excited British companies who were reaping the benefits of a weaker pound and an expanding Middle Eastern Market. The director of NASCO (the firm that supplies Weetabix and Ribena amongst other products) even estimated a 30-40% pick up in business.  This economic potential is not exclusive to just big London businesses either. A recent event in Sheffield saw local businesses have the chance to discuss deals with buyers from Saudi Arabia, UAE, Qatar and Kuwait.

Further opportunities will also arise with the increasing liberalisation of Middle Eastern economies. Currently, many entrepreneurs are ham strung by bureaucracy, archaic laws and poor infrastructure. The lack of bankruptcy laws across the region means that failure of a start up (which the majority tend to do) means jail time. Furthermore, outdated bureaucratic systems fail to keep up to pace of a dynamic start up. Finally, even the basics such as poor internet connectivity keeps entrepreneurs held back. However, many regimes are starting to attempt to confront these problems and while they won’t be solved immediately they could offer high potential growth in the next ten to twenty years.

Once Britain does leave the EU it won’t be able to gain instant prosperity from a pivot to the Middle East. Many companies will remain hesitant to invest in a region which has proved so unstable over the past twenty years. However, a diplomatic charm offensive from the government coupled with soft and hard power displays could coax businesses into seeing the Middle East as the next big emerging market and the next winning economic formula for Britain.