��������

The UK government faces many economic and political challenges at home ahead of the budget in late November. However, the mood continues to be more optimistic abroad.

The latest signal of this overseas positivity came with the visit of Rachel Reeves to �������� at the nation’s big Future Investment Initiative summit, the first trip by a UK finance minister to the region in about six years. A £6.3 billion ($4.8 billion) two-way package of new bilateral trade, procurement, and investment commitments was unveiled.

This includes £5 billion of export finance to boost UK manufacturing, plus multimillion-pound investment deals with a range of firms, including Aberdeen Investcorp, Barclays, HSBC, and Quantexa. The big UK business delegation accompanying Reeves included senior executives from Barclays, which announced a new regional headquarters in Riyadh to service clients across the Gulf, and HSBC, which will be relocating its �������� headquarters to the King Abdullah Financial District. Correspondingly, Saudi cybersecurity firm Cipher launched its European office in London, and Saudi investors and bankers have made a £75 million investment into British digital bank Vemi.

Welcome as last week’s boost will be to the UK economy, there is potentially an even bigger prize in play. That is a trade deal between the UK and the Gulf Cooperation Council, which is headquartered in Riyadh. The bloc — ��������, the UAE, Bahrain, Oman, Qatar, and Kuwait — is a major source of global economic activity, with a total gross domestic product of around $2 trillion in 2022. According to the World Bank, if the GCC continues to grow at a “business as usual” rate, combined GDP would rise to a projected $6 trillion by 2050.

The GCC has signed relatively few such trade agreements to date, including a pact with South Korea in 2023, more than a decade and a half after talks began. However, Reeves said last week that a UK-GCC deal is within striking distance after the positive dialogue in ��������. The finance minister added that she is “really confident we can get that deal over the line” after also engaging with officials from Bahrain, Kuwait, and Qatar.

Total annual bilateral trade is already worth about £60 billion, making the GCC bloc as a whole equivalent to the UK’s fourth-largest non-EU export market behind the US, China, and Switzerland. The UK Government said it estimates a GCC trade deal would add £1.6 billion a year to UK economic output, equivalent to about 0.06 percent of annual GDP.

The UK and GCC entered into trade talks in 2022, and Prime Minister Keir Starmer visited �������� and the UAE last December, within six months of having taken office after his landslide victory in July 2024. Since then, there have been multiple signals of closer ties.

This includes ��������’s Public Investment Fund purchase of a 15 percent stake in London’s Heathrow Airport from Spanish construction company Ferrovial; the fact that in 2025 alone the Kingdom has raised around £47 billion by issuing on the London Stock Exchange; and that only last month the UK-Saudi Great Futures Summit in London secured over £4.1 billion in deals, too.

The EU is engaging the Gulf as part of a wider strategy.

Andrew Hammond

The growing economic attractions of the GCC are not only recognized by the UK in Europe. The EU is engaging the Gulf more as part of a wider strategy toward key emerging markets following the election of Donald Trump to the US presidency, and also Russia’s invasion of Ukraine.

There is growing impetus for a GCC-EU trade agreement to be agreed during Ursula von der Leyen’s second term as European Commission president in the period till late 2029. One of the big prizes for the EU of a GCC deal could be further open access to investment from Gulf sovereign wealth funds. These tend to be cross-sector investors who often take a long-term, multi-decade economic perspective.

The EU is the second-largest trade partner for the GCC countries, generating €170 billion ($197 billion) in trade in 2023. Much of this trade is natural resource related. In 2023, imports of mineral fuels accounted for over 75 percent of EU imports from GCC countries. Moreover, since 2020, fuel imports have more than tripled, in large part due to a sharp shift in the EU’s supply sources caused by Russia’s invasion.

At present, EU-GCC relations are based on a cooperation agreement signed in 1989 which established regular dialogue on topics including economic relations, climate change, energy, and the environment. However, the EU would like a trade deal and, in 2022, former Italian Foreign Affairs Minister Luigi Di Maio was appointed as the first-ever EU special representative for the Gulf to try to develop a stronger, comprehensive and more strategic partnership, including ramping up efforts to revitalize negotiations for a trade agreement.

It is possible that wider developments could reinforce this dynamic of closer GCC economic cooperation with Europe, including the UK and EU. This includes potential steps toward implementation of a proposed India-Middle East-Europe corridor to foster connectivity and integration with Asia via a proposed route from India through the UAE and ��������, and into Greece.

The corridor concept, which would comprise vast road, railroad, and shipping networks, was given new impetus in September 2023 at the G20 summit in New Delhi. A memorandum of understanding to try to develop the project was signed by the governments of US, UAE, ��������, India, France, Germany, Italy, and the 27-member EU bloc.

Taken together, Europe-GCC ties would be boosted significantly if trade deals are agreed in the second half of the 2020s with both the UK and EU. In a more uncertain geopolitical landscape, both Gulf and European powers increasingly perceive the benefits of closer collaboration.

• Andrew Hammond is an associate at LSE IDEAS at the London School of Economics.