Throughout Ukraine’s 29 years of independence, it has enjoyed strong diplomatic support from the United Kingdom. However, trade between the two countries remains relatively limited. In 2019, Ukraine’s total trade in goods and services with the UK was $2.1 billion, a tiny amount of each nation’s global trade.
In an interview with the Kyiv Post, the long-time chairman of the British-Ukrainian Chamber of Commerce, Bate C. Toms, outlined the opportunities for growth in bilateral trade between the two countries in the wake of the UK’s departure from the European Union, which fully took effect on Jan. 1, 2021.
Having founded the BUCC in 1997, Toms has been an assiduous promoter of Ukraine as an investment destination for British capital for more than 20 years.
UK Export Finance
At present, Toms is spreading the word about the newly formed UK Export Finance (UKEF) agency, which has earmarked £2.5 billion (nearly $3.5 billion) for the financing of loans for projects in Ukraine that involve the import of British goods.
“The facility is drafted in extremely broad terms,” said Toms. “As long as you’re importing at least 20% of the funds being advanced you can also apply for loans for your working capital, for your local expenses, and even for imports from other countries. They offer the best financial terms currently available in Ukraine. The money can be 10 years, going up to 18 years.”
Building ships
The largest Ukrainian project financed by UKEF so far was outlined in the October 2020 memorandum on military and defense construction cooperation signed by the Ukrainian and UK defense ministers, Andriy Taran and Ben Wallace, respectively. UKEF will provide a $1.7 billion loan for the purchase of eight Barzan-class attack craft. This will help rebuild the Ukrainian navy after defections of personnel and equipment, as well as loss of shipbuilding facilities, following Russia’s military invasion and illegal annexation of the Crimean peninsula in 2014.
The first two ships will be built in the UK in cooperation with Ukrainian engineers, who will then use their new expertise to build the other six in Ukrainian shipyards, which will be upgraded as part of the project.
“Britain is going to teach Ukraine how it builds ships. It’s got over 500 years of expertise as a leading maritime nation. It will help Ukraine rebuild its shipbuilding expertise in the south of Ukraine to replace what was lost in the invasion of Crimea,” Toms commented.
Toms also told the Kyiv Post that the BUCC “has a member who has already taken up (the UKEF) facility.” A loan is currently being finalized for “an agricultural company which is importing British farming equipment.”
In addition to military and agricultural equipment, the BUCC chairman was keen to emphasize the new potential for importing British-made cars to Ukraine.
“Everybody selling automobiles in Ukraine should be looking to use UKEF to finance the importation of cars for sale,” said Toms.
‘Nothing like it’
“There’s just nothing like it for Ukraine from anywhere else. You’ve got a massive amount of money available to finance the importation of goods and their related projects. If you want to do a project in Ukraine right now, probably the best way to finance it, or a large portion of it, is to either finance it against a three-year track record (of relevant business experience) or as a project financing using UKEF. By the way, this is a post-Brexit development: Brexit was very good for Ukraine.”
The generous terms offered by UKEF come alongside another positive step in UK-Ukraine economic relations: the trade deal signed by President Volodymyr Zelensky and Prime Minister Boris Johnson on Oct. 8, 2020, to regulate the two countries’ trade relationship after Britain’s withdrawal from the EU.
The most notable change was the expansion of tariff quota limits on agricultural products.
Previously, Ukraine’s exports to the UK were capped by EU-wide quotas. In the October 2020 trade deal, the UK set its own quotas for imports of Ukrainian agricultural products, while the existing EU quotas for the remaining 27 members of the bloc stayed the same.
Big food customer
“Because Britain is the largest food importer in this hemisphere and in Europe, importing over half its food, I think it’s natural that Britain should be expanding its tariff-free quotas to receive more Ukrainian agricultural goods, both to guarantee Britain’s food security, especially at a time when there are problems importing products from the EU, and also… to benefit from lower cost, higher quality agricultural exports from Ukraine,” said Toms.
The BUCC chairman outlined how the two countries’ agricultural economies could operate in symbiosis, rather than competition: “British farming is two-thirds meat and dairy. The amount of grain produced is relatively small and not likely to increase much, so British agriculture need sources of grain and feed, so actually importing grain from Ukraine benefits British agriculture. It’s not competitive. Ukraine is not a market that produces a lot of meat and dairy, so they fit together very well.”
Trade envoy
Toms is upbeat about the appointment of Baroness Catherine Meyer as the UK’s first-ever trade envoy to Ukraine: “She’s an exceptionally bright and capable person who has very quickly got up to speed on Ukraine, and should make a huge difference in our bilateral relations. She’s there to facilitate trade, facilitate relations, and to solve problems.”
The BUCC chairman points to the story of Ring, a US start-up which received significant early investment from British billionaire Sir Richard Branson to open its main R&D centre in Ukraine, and was subsequently purchased for a sum in excess of $1 billion by Amazon, as an example of successful UK investment in Ukraine.
The story goes that Branson saw a guest on his private Caribbean island, Necker, answer the door to his home in California on his smartphone, and immediately became interested in Ring.
‘World class’ IT
“They made their money off the back of Ukrainian IT. The (founder) in Seattle had a good idea and a small team, but it wasn’t ready for the big leagues. With the work done in Ukraine, they got it to a level where it is world class, it’s a leader in its field,” said Toms.
When asked whether Ukrainian companies should play more of a role in changing perceptions of the country, the BUCC head insists that this duty should be undertaken by business associations and the government: “I don’t think it’s up to Ukrainian entrepreneurs to make themselves less commercially viable by waving the Ukrainian flag. It is the responsibility of our chambers of commerce and the Ukrainian government to get the message out there, that we are a high-tech country… so that people want to advertise their connection with Ukraine.” Toms adds that “we need to project Ukraine as the Silicon Valley of Eastern Europe.”
Persistent barriers
Of course, there are still some persistent domestic barriers to foreign investment in Ukraine.
According to the BUCC chairman, there are “two areas where Ukraine has got to improve its game. The most important is rule of law, and the second is intellectual property protection.”
However, these drawbacks should not be allowed to stop the country benefitting from a huge opportunity to expand economic ties with a key ally.
Toms is adamant that “Ukraine should be the principal beneficiary of Brexit. Ukraine should be the bridge that the UK now wants to build.”
