UK secures trade deal with Gulf states

LONDON — For years, the U.K. has looked on enviously as the Gulf states used their vast, oil-derived wealth to build global economic influence. Now it’s moving to claim a slice of the pie.

On Wednesday, Keir Starmer’s government achieved what three successive Tory administrations had failed to do: securing a trade deal with the six-nation Gulf Cooperation Council, with a combined wealth of around $2.3 trillion.

It’s no small feat for Brexit Britain. While the GCC operates with a common external tariff, it does not always negotiate as a single entity on services, investment and regulatory issues, meaning the deal required agreement both with the council collectively as well as with each of the six sovereign member states.

The riches on offer to the U.K. are significant. But as with any trade deal there are losers, with some campaigners already voicing their opposition before the full details have been published. As details of the deal trickle through, POLITICO has identified the British sectors that look most likely to benefit as well as those who appear to be missing out.

Winners

The City

London’s services sector will be the main beneficiary of the deal, with Britain exporting more than £20 billion in services to GCC countries last year.

“For us it’s an important signaling,” said Nicola Watkinson, who leads TheCityUK’s international team. “These markets have not necessarily been the most open traditionally, and this has been quite hard yards to get to this point, and even to get them to agree amongst themselves, let alone to agree with the U.K.”

As Gulf economies try to reduce dependencies on oil and diversify into tourism, infrastructure and renewables — through projects like Saudi Arabia’s 170km Line city — British legal, financial and engineering firms stand to benefit from winning contracts.

“The GCC is doing so much investment in infrastructure,” said Stephanie Betant, head of global trade solutions at HSBC. “With infrastructure investment, comes a lot of services need, and the U.K. is very good at it. I think it presents a big opportunity.”

For U.K. firms wary of shifting rules across the Gulf, the agreement also promises more predictable rules, reducing the risk of unfair treatment compared with local companies.

“This deal offers all companies entering the market from a U.K. perspective a baseline to then build on. It just gives any new entrant into the market the ability to fully understand what they can and cannot do, and a bit more transparency,” said Chika Muorah, EMEA associate director at TheCityUK.

In an unexpected surprise, the government’s trade deal includes provisions that enable U.K. companies to store and process data outside the Gulf “for the first time ever,” according to the government — a significant win given the region’s strict localization rules.

Saudi Arabia in particular has some of the toughest data localization requirements, reinforced by its Personal Data Protection Law, which came into full force in 2024. The rules have tightened restrictions on moving personal data overseas and raised compliance costs for foreign firms — particularly in banking and fintech.

But if you read the fine print, while the financial services chapter includes a dispute settlement mechanism — making commitments on financial data enforceable — the digital chapter does not extend the same legal safeguards. That means if Gulf states were to backtrack and reimpose localization outside financial services, the U.K. would have limited legal recourse under the agreement, leaving those commitments effectively non-binding.

There are some additional smaller wins, including commitments to recognize electronic trade documents to promote paperless trade, protections against governments forcing companies to hand over source code, and a permanent ban on digital tariffs.

Beyond the technical detail, the deal helps British lawyers, engineers and consultants travel more easily and stay longer in the region by simplifying visa processes.

Carmakers

Another stand-out winner from the deal is Britain’s automotive sector, which will benefit from the full and immediate removal of tariffs on 90 percent of cars, including hybrids. Tariffs on electric vehicles and EV batteries will be phased out over the next decade.

The SMMT trade association was cautious in its response, saying it welcomed the agreement in principle. “We look forward to seeing the full detail to understand its impact and ensure it supports the sector’s competitiveness and future growth,” SMMT chief executive Mike Hawes said.

But Hawes stressed that the sector’s immediate priority was restoring stable trading conditions disrupted by the conflict in the middle east.

“These markets are vital to U.K. automotive exports, and with the right framework in place, this agreement has the potential to support long-term opportunity for UK automotive manufacturers,” he added.

Food and drink

The Gulf’s vast expat population means any opportunity to increase exports of British staples to the region would always be welcomed.

Once in place, the deal will see the full removal of tariffs on a number of favorites enjoyed by homesick Brits, including cheddar cheese, lamb, smoked salmon and breakfast cereals.

Food and Drink Federation chief executive Karen Betts described the deal as an “exciting opportunity to boost trade” with a rapidly growing market. “The removal of tariffs from day one on iconic British products like oats, breakfast cereals and biscuits will help food manufacturers build export momentum in the years ahead,” she said.

Meanwhile, in a move warmly welcomed by the National Farmers’ Union, the deal maintains current tariff levels on imports into the U.K. for chicken meat, eggs and pork.

“The trade deals agreed in recent years have been a mixed bag to say the least, with limited benefit for U.K. farm businesses,” said NFU president Tom Bradshaw. “But I’m really pleased the government has listened to our concerns.”

Defense

As Gulf states operate in an increasingly unstable environment during the ongoing war in Iran, the deal helps them gain faster access to Britain for defense equipment and technology.

“There’s a clear national security need for a lot of the GCC nations at the moment,” said a U.K. defense figure, granted anonymity to discuss sensitive negotiations.

Likely short-term priority areas will include integrated air and missile defense systems — which detect and respond to incoming threats — counter-drone technology, and small drones. In the longer-term, joint ventures including BAE Systems partnerships in Saudi stand to benefit from easing red tape.

Britain, in turn, is happy to gain a willing customer to boost investment into the struggling sector.

“Our government’s not spending, therefore exports are the only way we’re going to make any money this year,” the person cited above added. “Anything that can prioritize exports is a good thing for the industry to sustain us.”

Defense companies will get immediate tariff-free access for turbojets and aerospace parts that currently face a 5 percent tariff. Tariffs on internal combustion engines, valves and centrifuges will also be removed.

ADS Group chief executive Kevin Craven said the removal of the tariffs is “particularly welcome news for the aerospace industry.”

“This is especially important for areas where the U.K. is a recognized world leader, including maintenance, repair and overhaul (MRO), avionics and propulsion,” he added.

The losers

Energy campaigners

Despite opposition from energy campaigners, the U.K deal now includes an investment protection chapter across all Gulf members, which contain investor state dispute mechanisms (ISDS).

The provisions give foreign investors the ability to sue governments over policies they believe will harm their business interests. Campaigners have argued the system can deter governments from pursuing measures in areas like climate policy.

While the U.K. already had this agreement with three of the six Gulf member states — Oman, Bahrain and the United Arab Emirates — it has now expanded these protections to Kuwait, Qatar and Saudi Arabia, extending the system across the bloc.

Oman and Bahrain will terminate their existing treaties to be part of the GCC framework, while the UAE will retain its current arrangement.

While the government argues stronger protections create greater certainty and encourage investment flows between the U.K. and Gulf states, energy campaigners believe it increases the risk of Britain being sued for climate policy changes.

“It locks in serious dangers to our ability to act on climate,” said Cleodie Rickard, campaigns and policy manager at Global Justice Now.

“This opens us up to yet more exorbitant claims by fossil fuel investors, and entrenches the U.K.’s shameful position as Europe’s leader in propping up the corporate court system,” she said.

While the deal’s sustainable development chapter preserves Britain’s right to pursue its own environmental policies and includes commitments from both sides to avoid lowering standards to attract business, the language in the deal is less forceful, meaning the commitments are not legally enforceable.