The Anniversary

Yesterday I attended a trade and investment conference at the British embassy, the first in a series of events to take place during British Week to mark the 20th anniversary of the British Polish Chamber of Commerce. The British ambassador, the under-secretary of state at the ministry of the economy, the Polish foreign investment agency members of the UKTI team at the embassy and representatives of some of the leading British investors in Poland, including GSK, BP and Atkins, and the BPCC discussed investment successes over the last 20 years and the prospects for enhanced investment flows in the future.

Over the last 20 years the Polish economy has been transformed and there has been dramatic growth in trade between the United Kingdom and Poland with the latest figures, as I wrote here in Trading Places, showing a healthy surplus in Poland’s favour. The increased trade reflects the dramatic growth in Poland’s economy which is now five times larger that it was twenty years ago although still a fifth the size of the UK’s. But despite progress to date can more be done to increase levels of trade and investment between the two countries?

The UK has always had a policy of an open economy open for business and historically has been an opponent of protectionism. This has resulted in high levels of FDI. It is generally easy and quick to establish a business in the UK. In addition there are increasingly effective links between business and universities leading to the development of high tech clusters which themselves attract more business, a good example being the Tech City in East London. Looking at exporting, while the UK has been good at exporting services to Poland it has been less effective with manufacturing exports. In this regard, Poland’s relatively poor showing in the World Bank’s ranking of countries by ease of doing business, as discussed in The Bank Job, has an effect as has the UK’s historical ties elsewhere. Nevertheless, UK businesses are increasingly looking at Poland both as an export market and a potential supply source. This is supported by UKTI’s commercial diplomacy initiative which is focussed on five areas where it is thought the UK has something distinctive to offer: energy (especially nuclear and shale gas), infrastructure, healthcare and pharmaceuticals, financial and retail services, and defence and security.

The development of the Polish economy means that hitherto there has been less opportunity for Polish business to invest in the UK although this is changing not least because some 800,000 Poles have moved to the UK since Poland joined the EU and some 47,000 have set up businesses there. And, ironically, UK companies that have invested in Poland are among the largest Polish exporters the UK. In addition Poland has had some notable successes particularly with the BPO centres around Kraków where a highly educated workforce with extensive European language capability is more attractive for business and consumer alike than is having the same functions located in Asia. And similar arguments apply to the supply train in general: as costs rise in China, the business case for having the jobs and production closer to the customer becomes stronger.

Of course, there are difficulties to be dealt with. The uncertainty affecting the Euro area is having an impact on both the UK and Poland although neither is in the Euro (Poland is bound by treaty to join at some stage). In addition there are particular issues such as the falling population in Poland which is combined with a relatively low participation in the work force with high unemployment outside the larger cities. Infrastructure remains a big problem in Poland as does bureaucracy and the court system. Nevertheless it would be wrong to be too negative. Poland enjoys a much more stable and transparent business environment than 20 years ago and does offer real opportunities for those who are prepared to meet the challenges.

How then to sum up this wide-ranging discussion? Clearly both the UK and Poland have much to gain by increased levels of mutual trade and investment. The UK needs to be better at taking advantage of the opportunities Poland offers as an export market and supply centre and Poland needs to continue to strive to improve infrastructure and ease of doing business. Both countries need increasingly to focus on high quality products and services delivered at competitive prices and Poland should move away from trying to compete simply as a lower cost base for western European companies. Whatever happens, it seems that the picture in 20 years time will be as different again from now as it today from 20 years ago.

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