The British government should make Saudi Arabia a top priority

Interview with Lord Dominic Johnson of Lainston

Bilateral trade between Great Britain and Saudi Arabia has grown considerably in recent years. Indeed, the total trade in goods and services between the two Kingdoms amounted to £17.6 billion in the four quarters to the end of Q1 2024. This makes Saudi Arabia the United Kingdom’s twenty-third-largest overall trading partner as well as its thirteenth-largest export market for services. At the same time, the Saudi government’s sovereign wealth fund – the PIF – is pouring billions of pounds’ worth of investments into the British economy.

In order to shed light on the importance of the UK-Saudi trade partnership, and the economic transformation that is currently taking hold within Saudi Arabia, Jack Dickens spoke to Lord Dominic Johnson of Lainston. Lord Johnson served as the Minister for Investment under the previous Conservative government between 2022-2024. In that role, he helped to lead a delegation of over 300 British businessespeople to Riyadh in May of this year, which was the UK’s largest trade mission for over a decade. 

Lord Johnson told Inside Saudi about the opportunities that are available to British businesses in the Saudi market, and why the UK’s new Labour government should prioritise developing closer trade relations with Saudi Arabia.  

Jack Dickens (JD) – You have been visiting Saudi Arabia since the 1990s. Can you tell us about the changes that you have witnessed in the country over the last three decades?  

Lord Dominic Johnson of Lainston (LDJ) – I have always done business in Saudi Arabia with my asset management company. Until relatively recently, Saudi was seen as a source of cash. People like me trooped off to Riyadh once a year to basically try and get money for our funds and monetary businesses. My last company, Somerset, invested in Saudi listed companies, but I never had a great deal of exposure to the Saudi market. At the same time, in the eyes of many western governments, Saudi Arabia was viewed as a purchaser and a source of capital. It was and is, of course, an important military and strategic ally. But on an economic level, ministers and businesspeople were primarily going to Riyadh to sell defence technology and get money out to invest elsewhere in the world. 

This all changed when Crown Prince Mohammed Bin Salman launched the Vision 2030 programme in 2016. Today, Saudi is viewed as an opportunity for investors and companies seeking to partner with the government and build businesses. In the last two years, Saudi was probably my key market in terms of visits and interaction with ministers, and I have found the experience of going to Riyadh and dealing with Saudi government ministers very exciting and enjoyable. Riyadh itself is a completely different city to the one that I visited in the ‘90s. On my most recent trip to Saudi earlier this year, the whole place reminded me of what was going on in East Asia when I went there in the mid-‘90s. The country has opened up, fabulous hotels are being built, and there is a real sense of dynamism and activity. It has become an incredibly exciting market. 

JD – What is driving this transformation, in your opinion? What is Saudi Arabia getting right? 

LDJ – They are combining all the ingredients that are needed to create a great market economy. Firstly, the government is providing strong frameworks and introducing sound regulations. The government is making it easy to set up companies and is putting in place new financial regulations so that markets are properly governed. The playing field is now being levelled and structured in a way that will provide international investors with confidence and allow capital to flow in and out. 

Secondly, the government is supporting business. I’ve never come across a government that is so pro-business and so proactive in courting businesses. They are really working hard to sell Saudi Arabia as a base for business. As Minister for Investment in the Department for Business and Trade, I worked very closely with Saudi ministers such as Dr. Majid Al-Kassabi, the Saudi Minister of Commerce, and His Excellency Khalid al-Falih, the Minister of Investment, both of whom have been brilliant in pursuing the Crown Prince’s strategy. 

The third ingredient is opportunity. Vision 2030 is huge. You’ve got a market that’s from scratch, completely fresh and completely open. Almost every industry that we have in the United Kingdom is still being developed in Saudi Arabia, apart from oil and gas, petrochemicals and construction, where the Saudis are already very advanced. So the opportunities for UK businesses to go there and build a long-term, sustainable business for the Saudi market and for the region in a whole host of areas – in insurance, financial services, law, consulting, accounting, technology, and clean energy – are just gargantuan.

Finally, any great economy needs people and momentum, a Zeitgeist. I think that Saudi Arabia has both. When you go to a dinner party in London, people talk about mortgages and the cost of living. When you go to Saudi, young people are talking about opportunities and how their family members have all got these amazing jobs, how they’re all at great universities, either there or abroad, and how they’re going to build an amazing economy

JD – How would you compare the opportunities that are available to businesses in Saudi Arabia today with those in other dynamic emerging markets, such as India? 

LDJ – There are, of course, opportunities in any market. However, some markets are more open than others. India, for instance, is a very protected market. Say you work in insurance; it’s actually very difficult to go and set up your insurance company in Delhi. You’ve also got a lot of established local companies, with which you’re going to have to compete. Saudi is exciting because it has a fast-growing insurance market supported by new regulations, which would benefit from British expertise, and because it doesn’t have a fully-fledged financial services industry. It has solid banks, but it doesn’t have the complex ecosystem surrounding them that we have in the UK, so Saudi banks need to draw on British firms’ knowledge of specialist asset management. You haven’t got a situation like this really anywhere else in the world, where you’ve got an economy that is, in several areas, starting from scratch, and where the opportunities are so huge across such a broad range of sectors.

JD – So Saudi Arabia’s Vision 2030 programme is providing real opportunities for international businesses and investors. Do you foresee any challenges? 

LDJ – The hardest thing for governments of any description around the world to wrestle with, and we find it just as hard in the United Kingdom, is that you get successes and failures. This will inevitably be the case in Saudi Arabia as well. You’re going to have hotels built that don’t make any money and you’re going to have tower blocks built that might not be fully let and you’re going to have roads built that might not be fully utilised, but that’s fine. Capitalism is a dynamic force. As long as you’ve got a broad strategic plan and you continue to keep your market open, and you make it easy for people to come, live, work and make money in your country, then you’ve got a great dynamic economy and capitalism will take care of the rest.

I think that the British government and British companies can play a key role by explaining what more the Saudi government needs to do. The Saudis need to keep pressing for an open market. They also need to keep strengthening legal structures, so that people know that there is a legal system that is truly fair when it comes to corporate and commercial relationships and outcomes. Those things are absolutely crucial for attracting the international investment and human capital that Saudi Arabia needs to be a success. I think that, in a collaborative and useful way, we should make sure that any issues are clearly highlighted.

JD – What is the best way to build connections between British businesses and the Saudi market? 

LDJ – People need confidence; it’s a big leap to go abroad. There are obviously several large multi-nationals already operating in the Saudi market, but what I want to do is get British SMEs to explore the opportunities that are out there. Economic value will come from Britons with a thirty-person company thinking, “let’s take two or three people over to Saudi and see if we can make it stick.” The best way to get people excited about Saudi is to take them there, because there’s a lot of historic prejudice around Saudi Arabia. This is why, as part of a trade mission overseen by the previous British government in May, I was involved with taking a planeload of British businesses of all sizes to Riyadh. 

JD – Can you tell us more about the trade mission? What was the thinking behind it and did it succeed? 

LDJ – This was a cross-government initiative and it was the biggest UK trade mission for over a decade. Oliver Dowden, the former Deputy Prime Minister, led the initiative and did a great job, but several other government ministers were also involved. We led a delegation of more than three-hundred British businesspeople and held the Great Futures Summit in Riyadh on 14-15 May, so just before the UK general election. We wanted to show the Saudi government that the UK is their partner when it comes to commercial investment. My job as investment minister was to make sure that the detail was covered and people felt energised to do something. Most importantly, the event produced real opportunities for British businesses. I had businesses come up to me and say, “we’ve just done some business, I’ve got a contract”. I can’t give any specific examples because it wouldn’t be appropriate, but, as a businessman myself, I was delighted. Real business opportunities came out of that –  partnerships on the ground, orders, contracts and activity – and that’s what is important; that’s what businesses will want to see and hear.

JD – As you say, there was a change of government in the UK in July. What advice would you give to your successors in the Department for Business and Trade? 

LDJ – First of all, I’m here to help – I’m a patriot before I’m a party person, so I’m available should they want my advice. I don’t know what the current government’s plans are, but I would encourage them to appoint a new Minister for Investment, and I would also encourage them to appoint someone who they are going to keep in place for five years. The investment minister role is very different to other ministerial roles because it’s basically about relationships, so you ned to appoint someone to have those relationships. One of the issues that we faced in Conservative governments over the last five years was the turnover of ministers. It was a problem – it was a problem for the citizens of the UK, and it was also a massive problem for my interlocutors; it made it harder to build and maintain effective, long-term relationships with our international counterparts. 

JD – Should enhancing the UK’s trade relationship with Saudi Arabia and the Gulf Cooperation Council be a top priority for the new government? 

LDJ – Yes, absolutely. I think they should get out to Saudi Arabia and the Gulf countries as soon as possible and start building those relationships. Start maximising them, start helping businesses to go out there, be successful and generate profits. A free trade agreement with the Gulf Cooperation Council is ready to go, in my view. There is minimal friction on trade and the previous government was close to securing a deal before the general election. Our new government has got a clear five-year mandate. My view is that they should get on and sign a free trade deal; it will only benefit British citizens.

Lord Johnson