The United Kingdom and South Korea are set to begin discussions on a new, comprehensive trade deal aimed at amplifying bilateral trade.
South Korea, the world’s 13th largest economy, is experiencing a surge in import demand, signalling increased opportunities for premium British goods and services. Concurrently, the two nations will declare a historic £21 billion Korean investment in the UK’s green energy and infrastructure, expected to generate over 1,500 specialised jobs.
Tomorrow, 22 November, the UK’s Business and Trade Secretary, Kemi Badenoch, will formally initiate negotiations for a revised trade deal with South Korea, aiming to bolster trade and reinforce ties with this pivotal ally.
This initiative coincides with Korean companies pledging £21 billion in investments across the UK, focusing on renewable energy and infrastructure, thereby fostering over 1500 expert jobs.
South Korea, recognised as the 13th largest global economy, is poised for a substantial increase in import demand. With approximately 45 million middle-class consumers and an import market projected to expand by 45% by 2035, South Korea offers significant prospects for UK businesses.
Both the UK and South Korea are advanced economies with substantial digital sectors. However, the current trade agreement, over a decade old, lacks digital provisions reflective of today’s economic landscape.
With around 80% of UK’s service exports to Korea being digital in 2021, modern digital provisions could unlock considerable opportunities for British businesses.
Since the existing trade agreement with South Korea was established in 2011, the UK’s trade with South Korea has more than doubled. An enhanced trade deal is anticipated to further elevate the £16 billion annual trading relationship, supporting jobs and livelihoods throughout the UK.
Business and Trade Secretary Kemi Badenoch stated ahead of the launch, “The government is upgrading our trade deal with South Korea to ensure that our trading relationship plays to the UK’s strengths as an advanced, high-tech economy. This refreshed, modernised deal will boost our world-leading services sector, while also creating new opportunities for UK exports such as in our world leading food and luxury goods sectors.”
The negotiations will be launched by the Business and Trade Secretary alongside Korean Minister for Trade, Industry and Energy Bang Moon Kyu at the UK-Korea Business Forum at Mansion House, marking Korean president Yoon Suk Yeol’s state visit.
At this event, the UK and Korea will also announce a record £21 billion of investments in green energy and infrastructure projects in the UK. This new investment, which significantly exceeds Korea’s 2021 foreign direct investment of £1.9 billion in the UK, demonstrates the robustness of the UK-South Korea trade relationship. It is expected to create over 1,500 skilled jobs and spur innovation nationwide.
The investments include:
- A £9.7 billion investment by the Republic of Korea Sovereign Wealth Fund in UK renewables, green infrastructure, and waste management over the next decade;
- £2 billion from Shinhan Financial Group for renewable energy and infrastructure projects in the UK;
- £650 million by SeAH Wind for a cutting-edge monopile manufacturing facility in Teesside Freeport, creating 750 jobs by 2030;
- £150 million by SPC for establishing 200 cafés across the UK, generating 400 jobs and engaging 200 local businesses in the supply chain;
- £90 million by Hanwha Phasor for a new European Space Research and Development Hub in Cambridge, creating 100 skilled jobs.
Minister for Investment Lord Johnson said, “Just weeks after my hugely productive trip to Seoul, I’m thrilled to see Korean investors committing £21bn to exciting new projects which will create jobs and spur economic growth across the UK. I’m hugely focused on securing greater partnerships with sovereign wealth funds, and so I greatly welcome the Korea Investment Corporation’s £9.7bn for renewable energy, fintech and life sciences – three sectors the UK is leading the world in.
As we will see at next week’s Global Investment Summit, the UK is one of the best places in the world to invest thanks to the huge growth and innovation that we are fostering in our science and tech sectors. The investments secured today are yet further proof of that and how we continue to strengthen our trade and investment ties with South Korea and the wider Asia Pacific region.”
British brands are flourishing in the Korean market, with leading UK technology and green energy companies announcing over £2.5 billion in business deals with South Korea. Bentley and Diageo are also expected to confirm over £200 million worth of contracts in the country this year, supported by the Department of Business and Trade.
The proposed deal aims to benefit nearly 7,000 UK businesses exporting to Korea, 85% of which are Small and Medium Enterprises (SMEs). The new agreement is likely to include measures supporting smaller businesses, such as digitising and simplifying customs procedures.
The UK is also seeking to establish simple and progressive rules of origin, ensuring continuity and long-term stability while enabling as many businesses as possible to benefit from reduced or zero tariffs on exports to South Korea.
Lord Mayor of the City of London, Professor Michael Mainelli, commented, “It is an honour that this exciting trade communique between two modern economies has been announced here at the Mansion House. The Republic of Korea is a rapidly growing economy with significantly advanced digital sectors.
“Financial services is the second largest services trade exported from the UK to the Republic of Korea and an upgraded trade deal can further bolster opportunities across Britain. Additionally, as one of the world’s largest services exporters, this agreement will be key to the UK’s digital transformation ambitions, not just for large firms and conglomerates but also for small and medium sized enterprises seeking to benefit from streamlined and digitalised procedures with customers and businesses in the Republic of Korea.”
Chief Executive Officer at TheCityUK Miles Celic said, “This is a significant step in modernising, strengthening and deepening our partnership with South Korea. It is an opportunity to secure strong digital trade provisions, fostering more robust collaboration between our nations in the exciting growth technologies of tomorrow.”
Korea, a top-three global producer of essential goods such as semiconductors and ships, plays a crucial role in global supply chains. Strengthening trade links with dynamic Indo-Pacific economies like Korea could help mitigate future economic shocks and complements the UK’s engagement in the region, including joining the CPTPP trading group.
The UK is already a prime destination for Korean green investment, with Korean companies leveraging UK expertise in offshore wind, aiming to construct the world’s largest offshore wind farm by 2030. Many engineering contracts for Korean offshore wind projects have been awarded to UK firms, and enhancing the trade deal could further solidify this partnership.
The announcement precedes the Global Investment Summit, where the UK will host approximately 200 of the world’s leading investors. The summit will highlight the UK as an ideal investment destination, driving significant new investment into every sector of the economy, particularly in science and technology.