The ties that bind the United Kingdom and Canada together—both historic and economic—have often been tested, but are strong and resilient enough to withstand political disruptions. We don’t just share history, culture and language, the U.K. and Canada are members of the G7, G20 and, of course, the Commonwealth.
“In 2020, bilateral trade between the U.K. and Canada was $27.8 billion. Brexit or no Brexit, the relationship between Canada and the U.K. is strong,” says Olga Vovk, EDC’s senior regional manager for Europe. “Put together, Scotland, England, Northern Ireland and Wales are a strong market for Canada’s goods and services across a diverse range of sectors, including energy, renewables, infrastructure and transportation, advanced technologies and financial services.”
- Despite disruption with the rollout of Brexit, the U.K. remains a durable springboard for Canadian companies into the European market. This is due to a U.K.-EU trade deal that came into force on Jan. 1, 2021.
- The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) was introduced in 2017, but following Brexit, the Canada-United Kingdom Trade Continuity Agreement came into force on April 1, 2021. This agreement ensures continued preferential trade access into each other’s markets and the elimination of tariffs on 98% Canadian products exported to the island nation.
- The U.K. is a highly evolved and sophisticated economy with a leading presence in financial markets. In early 2022, the combined market cap for companies listed on the London Stock Exchange was $4.9 trillion, while the junior exchange—Alternative Investment Market—has grown over 20 years to include 1,000 companies and a combined market cap exceeding $157 billion.
The U.K. is very competitive not just for goods and services, but also for R&D in cleantech and renewable energy. This is driven by the government’s focus on the environment and decarbonization, which has targets for electric vehicles and public transportation, clean energy production, nuclear energy production through small modular reactors and renewable energy.
The government’s Road to Zero Strategy policy sets the goal of 50% to 70% of new car sales to be ultra-low emission by 2030, alongside 40% of new vans. The U.K.’s hydrogen strategy, which is central to its drive to net zero, has a goal of five gigawatts of low-carbon energy production capacity by 2030. The result? Investment in a range of low-carbon solutions, including offshore wind generation, advanced nuclear power, zero emission vehicles, green public transportation, carbon capture and storage and green finance. The government is also pursuing the “rainbow” of hydrogen solutions: Green (linked to renewable energy), grey or blue (related to gas and carbon capture) and pink (linked to nuclear sources).
“Overall, it’s driven by the government undertaking climate change commitments, and companies and investors creating net zero roadmaps and initiatives,” says Vovk.
Other areas of opportunity
- The agri-food industry is constantly expanding for Canadian exporters, particularly in pulses and grains, plant-based proteins, maple syrup and seafood.
- Advanced technologies and digital industries
- Infrastructure and transportation, particularly electric vehicles and batteries
- Storage of renewable energy resources is a growth area in the U.K., as the country continues its expansion of wind and solar farms off the coast of Scotland. This industry is attractive for companies investing in renewables.
- The U.K. has taken the unique step to privatize its water and wastewater industries, resulting in increased overseas investment opportunities.
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The U.K. is one of the most dynamic and robust economies in the world, attracting billions of dollars in global trade annually. As a result, it’s also an extremely competitive market to enter and gain traction over both existing local firms and those from other countries.
- As a highly competitive economy, the U.K. also favours R&D, innovation and services that can be far more advanced than anything overseas businesses can offer, Vovk says. On the other hand, Canadian companies can quickly establish themselves and gain access to a pool of venture capital and other forms of investment.
- In alignment with the EU, the U.K. has very exacting requirements and standards for imported foods, particularly poultry and beef. Canadian exporters should seek certification and guidance on labelling, inspection and content standards.
Ranked eighth of 190 economies in 2020 by the World Bank for Ease of Doing Business, the U.K. is highly regarded for encouraging businesses to establish themselves. The robustness of its legislation and rule of law, emphasis on R&D, favourable labour laws, ease of business registration, tax structure and volume of trade on the London Stock Exchange moved it up from ninth place in 2018. By contrast, Canada is ranked 23 out of 190 and the United States is sixth.
Canadian exporters should invest time and money in partnering with a local presence to ease their entry into the market. And, while the U.K. speaks English, dialects and accents can pose some challenges.
- Short-term risk rating: Very low
- Top Canadian exports (2020): Precious metals and stones, chemicals, metals and minerals, agri-food, machinery, forestry products, various services
- Canadian exports total value (2020): $19.9 billion
- International trade agreements with Canada: Canada-U.K. Trade Continuity Agreement
- Population: 68 million