Horizon blog: Gulf deal could profit UK meat and dairy but politics a potential pitfall

AHDB has been following the various trade negotiations that the UK government has had to date and examining the potential impact through the Horizon series of publications. With the UK government now turning its attention to the Gulf Co-operation Council (GCC), our Economic Strategist Sarah Baker looks at the future opportunities, as well as the work we are currently undertaking, in this lucrative market.

The GGC is a regional trading bloc made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and The United Arab Emirates. Formal negotiations will begin next year, and in this article we will examine the potential opportunities for UK agriculture.

More than £597 million of UK food and drink exports headed to GCC countries last year, including lamb, biscuits and chocolate. For farmers and food producers the prospect of a trade deal with the GCC provides a significant opportunity. The expansion of the middle-class consumer in the region is driving an increased demand for meat and dairy, and for high-quality imported foods. We are well placed to capitalise on this increased demand with the UK brand associated with quality and heritage in these markets.

The region is very import-dependent and food import regulations and standards are strictly enforced, given strong adherence to the Islamic faith. For our levy payers, there is growth potential for imports of both red meat and dairy products, taking account of the increasing consumer base.

Figures from HMRC show that between 2018 and 2019, there was a 319% increase in the volume of UK lamb exported to the Middle East. The volume of fresh and frozen sheep meat exported to the UAE for instance, increased from 79 tonnes in 2019 to 657 tonnes in 2020. While the volume of UK lamb and mutton exported to the Middle East is relatively low in comparison with Australia and New Zealand, interest in UK lamb is growing across the region. AHDB recently appointed an agent in the region to engage in outreach and other promotional activities in order to highlight UK sheep meat as a high quality and versatile product.

UAE is also a key market for UK dairy products. Food and drink imports are due to increase by 30%, with dairy products as the third biggest import for the UAE. A key area of opportunity for the dairy sector, and especially for cheese, is the food service and hospitality industry. In Dubai, alone, there are 70,000 hotel rooms, as well as airlines and many other business opportunities. As a premium destination with more than 16 million tourists a year, this is a key market. The UK shipped more than 2,000 tonnes of cheese to the UAE in 2016, according to data from UK HMRC. There could be an opportunity for high-value dairy cheeses. Most favoured nation (MFN) tariffs are currently 5% for powders, cheese, and butters.

Recognising the opportunities to further grow our sheep meat exports to the region, AHDB recently hosted, in collaboration with UK Government in the region, six exporters at a reception for over 150 buyers in the foodservice sector. British lamb and dairy was showcased to this influential group and this highlighted the quality of our products resulting in many positive potential commercial transactions – this is an example of the AHDB export team at work, linking our exporters with commercial buyers to drive trade and support livestock and meat prices.

We now look to Gulfood in February 2022, the region’s largest food showcase event that brings buyers from the area and further afield. AHDB will have both a meat and dairy stand to promote our products to this increasingly important destination. Such activities from part of our export growth strategy to add value and increase market opportunities for our world-class products.

So, with a prospective trade deal with a valuable net importer of food, a growing, affluent and discerning consumer base with an established demand for UK produce what could possibly go wrong? Inevitably, the negotiations will not be as straightforward as one might suppose given simple demand and supply factors. The EU has seen negotiations, which started in 1988, repeatedly stall over political issues, most notably the human rights issues in the GCC region. How the UK government manages to navigate this hurdle will be closely observed not just by AHDB, but also by the EU and the wider global community when formal negotiations commence in the New Year.