Russia is currently the eighth largest economy in the world. It’s been predicted to become the largest consumer market in Europe by 2020.
Russia has started major investment and modernisation programmes which will provide opportunities for UK firms. It’s looking for foreign investment, expertise, technology and resources to help.
Russia’s diverse regions also present opportunities for UK business. These regions are increasingly competing to attract international investment. Some regions have made significant improvements to make it easier to do business, such as Kaluga and Kazan.
About 600 UK companies have a physical presence in Russia. Over 5,800 UK traders exported goods to Russia in 2013.
Benefits for British businesses exporting to Russia include:
- desire of Russian companies to use international accounting and legal standards
- respect for ‘UK made’ brands, including retail and luxury
- anticipated increase in the number of Russian mid and small sized businesses
Strengths of the Russian market:
- young and well educated workforce
- strong transport links and logistics
- access to supply chains that could lead to exports to other markets in the Commonwealth of Independent States
Doing business in Russia can be more difficult than operating in many Organisation for Economic Co-operation and Development (OECD) countries. It’s important that British companies come to Russia well prepared.
Russia covers one seventh of the world’s land mass. Its incredible size means that it:
- spans 9 time zones
- has extremes of climate and weather ranging from sub-tropical in the south, to Permafrost in the north
- has varying levels of development, and differing social and economic factors
- Russia’s regions can have different regulations in force
- potential language barriers
- bureaucracy and slow response from local authorities and government agencies
Russian economic growth has slowed annually since 2010. The economy grew by 1.3% in 2013. The economic slowdown is partly due to developments in the global economy. However, there are also structural constraints which restrain Russia’s growth potential including:
- large state sector
- inefficient use of labour
- challenging business environment
Reforms are planned, but progress to date has generally been slow.
It’s predicted that growth will fall further in 2014 as a result of international reaction to Russia’s actions in Ukraine.
The retail sector is important to the Russian economy and grew by 3.9% in 2013.
Free Trade Agreements
Russia, Belarus and Kazakhstan have signed a treaty establishing the Eurasian Economic Union (EEU) which will form a Customs Union and a Single Economic Space. It’s likely to come into force from 1st January 2015. The EEU aims to create conditions for the free movement of goods, services, labour and capital.
Other former Soviet states are also considering joining the Union including Armenia and Kyrgzstan.
World Trade Organisation (WTO) accession
Russia became a full member of the WTO in 2012. It’s now expected to follow WTO rules and become integrated into the global economic system.
Russia has committed to:
- change customs duty rates to permit access to the Russian services market
- apply recognised food safety, and animal and plant health measures
- simplify import licensing procedures
- make changes relating to protection of intellectual property
Trade between UK and Russia
UK exports of goods and services to Russia grew by over 75% between 2009 and 2012. Russia became the largest market for UK goods exports outside of the US, the European Union (EU) and China in 2012.
However, UK goods exports to Russia fell by about 7% in 2013 due to the economic slowdown.
Around 2.5% of Russian imports come from the UK. The UK’s share of the Russian import market currently remains below that of France, Germany and Italy.
Top UK exports include:
- engineering products
- consumer goods
A list of some of the most recent opportunities which can be accessed through Chamber International are detailed under the relevant sector heading (see left).
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