Trade and economic relations between Poland and the UK

Jun 10, 2020

Poland and Britain’s contacts are characterised by a long and harmonious cooperation. Both countries traditionally have had good political and economic relationships. Recently, Britain and Poland were celebrating the 100th anniversary of their mutual diplomatic relations. In 1918, Marshal Józef Piłsudski sent an official, diplomatic letter stating that Poland had become an independent state in the International arena. A year later, in July 1919, diplomatic relations between Great Britain and Poland were officially renewed. London and Great Britain were always very important allies for Poland. Great Britain was one of the first countries which gave its support to the newly formed Poland. Over the years, the friendship between Great Britain and Poland were developed and strengthened, especially during important historical events such as the Second World War. Later this was further amplified throughout the period of the political transformation and peaceful revolution in 1989 which resulted in the collapse of the Soviet Union. In 2005, Poland become an EU member and this further intensified the cooperation between London and Warsaw. 

2016 was also a good year for Polish British relations. That year, partners initiated closer cooperation by establishing the British Polish Strategic Partnership. Polish and British politicians share similar views about the European security and defence policy which constituted the basis for the cooperation. Both partners see the centrality of the NATO Alliance in solving current and future security threats in Europe. Other important objectives of the Strategic Partnership are to strengthen bilateral relations between the two countries and to open up new areas of cooperation.In order to achieve the aims of cooperation and to exchange new ideas between two countries, the Belvedere Forum was established. The Forum provides a platform for dialogue amongst the diverse groups of governmental and non-governmental members from both countries. Every year the event brings together specialists, experts and representatives from social organisations, academics, business, media, think-tanks, and cultural associations. The meetings are held generally once a year and are organised remotely in Poland or Britain.

Trade and economic relations between the two countries

Great Britain

Great Britain is an important economic partner for Poland. The United Kingdom is one of the most dynamic economies in the world, ranked as seventh in the world and the third strongest economy in Europe.  The United Kingdom not only very actively invests abroad but is also one of the leaders in attracting foreign investment. In the recent years, Britain has been placed at the top of the world most prestigious rankings such as World Economic Forum – The Global Competitiveness Report 2019 (9th place/ Poland 37th), World Bank’s Doing Business 2020 ranking (8th place/Poland 40th) and the Global Innovation Index 2019 (5th place/Poland 39th). 

Great Britain is a country with a high level of economic development. The structure of British GDP production oscillates around 79.2% services, 20.2% industry, 0.7% agriculture. Trade in services, mainly banking, finances and insurance is one of the most important sectors of the economy. The London City and Canary Wharf districts are the heart of finances industry. London is second the most important financial centre of the world after New York City. The banking sector is also the largest exporter. In 2018 the export of services amounted to 297.4 billion GBP and accounted for 46.3% of global exports of Great Britain. The most important recipients of British export of services are: the USA, Germany, France, the Netherlands and Ireland respectively. 

Britain has an intensive, highly-mechanised agriculture which satisfies 60% of the country’s food needs, but only 2% of the population is employed in this sector. The United Kingdom is regarded as a leader in innovations. Industrial production includes mostly advanced technologies; the aviation, pharmaceutical and fuel industries have a significant share in the economy. The UK also has rich deposits of energy resources (coal, natural gas and oil). 

In 2018, the most important partners in British exports were the USA, Germany, the Netherlands, France and Ireland and with respect to imports, Germany, China, the Netherlands and France. Poland ranked 11th position on the British export list. The European Union countries accounted for 49.1% of the value of British exports and 54.4% of imports. The UK exports is dominated by cars – 9.5% of total exports, medical and pharmaceutical products – 7.1% mechanical energy generators – 7.0%, crude oil – 5.8% and aircraft – 4.3%, medical and pharmaceutical products – 5.0%, refined oil – 4.6%, mechanical energy generators – 4.2% and clothing – 4.1%. 

The main exported and imported products are fuels and related products, nuclear reactors and their parts, vehicles, electronic equipment, aerospace industry products and pharmaceuticals. The USA remains the largest foreign investor in the UK and the largest recipient of British investments.

Poland

Great Britain is also important for Polish exports. Poland has a positive balance in foreign trade with the United Kingdom. A mutual exchange is developing very dynamically. Between 1996 and 2010, its value increased tenfold. In 2018, Polish exports to the UK amounted to almost EUR 14 billion. This placed the country in the third place of the largest recipients of Polish goods. In turn, imports from the UK amounted to over EUR 5.5 billion, which places the UK in the tenth place of Polish partners. Poland recorded a positive balance in mutual turnover of 8.3 billion euro. In the first ten months of 2019, Polish-British trade turnover amounted to EUR 16.2 billion (a similar level since the same period of 2018). Poland generates a surplus in the trade exchange with Great Britain.

The structure of Polish exports is dominated by highly processed goods, such as mechanical equipment, telecommunications, road vehicles, office machinery, electrical machines, apparatus and devices. These are goods manufactured in Polish factories by international concerns. Polish companies export mainly the goods from the agriculture or furniture industries. The products are especially well received by the British markets. Customers value the excellent quality and products which already have a good, strong reputation in Britain. 

According to the National Bank of Poland’s data, the value of British investments in Poland at the end of 2009 was EUR 4,661.4 million. Poland is a very attractive place for new investments among British companies. Majority of all investments is made by 15 companies present at the Polish market. The largest investors are Tesco Plc, Imperial Tobacco Plc, GlaxoSmithKline, British Oxygen Corporation, AVIVA Plc, Bates Ltd, Cadbury’s Schweppes, Shell Overseas Holdings Ltd. 

Currently, many British companies which provide Business Process Offshoring services – like accounting, human resources management, research and development, are looking to locate their service centres in Poland. Poland has already managed to attract several large investments to this sector. Unfortunately, small and medium enterprises are quite reluctant to choose Poland as a place for their business. The problem for them are complicated regulations, their variable interpretation and a long process of registration of companies.

Another positive trend noted in the Polish economy after 2005 is the fact that more and more Poles and Polish companies are interested in starting up a new business in the UK. Many new Polish companies have been already established in the construction, wholesale, hospitality and retail sectors. It is estimated that there are around 40,000 companies established by Poles in the UK and the value of Polish investments amounted to about EUR 904.8 million. Polish trade companies also open their branches in London. In 2017, PGNiG opened a liquefied natural gas (LNG) trade office in London. Also, BGK (Bank Gospodarstwa Krajowego) decided to open its representative office in London. The main aim of the Bank is to support the expansion of Polish companies in the UK.  The interest in undertaking business activities in the UK is continuously increasing.

Polish direct investments in the UK in 2018 amounted to a total net of EUR 34.5 million, with net equity (shares and other forms of equity) amounting to EUR 37.2 million, net reinvested profits EUR 35.2 million and net debt instruments EUR 37.9 million. The cumulative value of Polish direct investments in the UK at the end of 2018 amounted to EUR 0.96 billion, which means that the UK is the 8th largest recipient of investments from Poland. The biggest Polish companies which decided to invest in the UK are the Can-Pack – production of metal packaging for food and chemical industry, Boryszew – automotive industry, Polcom – hotels, Rec Global – software engineering), Kulczyk Investment – consulting), Comarch – IT, Integer – InPost packs, Impel – real estate, Telefonika Kable – cables and wires, Krosnoglass – decorative glass, Press Glass – windows, Wielton – trailers, Black Red White, Forte, Nowy Styl  – all from the furniture sector, Fakro – windows, Amika – household appliances, Pelion – pharmaceuticals, Inglot – cosmetics, with own shops in London, LPP – clothing or Colian – food industry. 

Brexit

The upcoming Brexit may, however, change the rules and regulations which control the access to the British market.  Possible changes could have a negative impact on the volume of Polish export and the inflow of foreign direct investments. Poland observed the growth in export especially after the accession to the EU. This is the result of the strategies chosen by international corporations which had established their branches in Poland after 2005 in order to export to the British market. The share of Polish export to Great Britain is much higher than in other Central and Eastern European countries. 

The experts were already commenting that after the transition period it may be more difficult to recover debts from the contractors in the UK, as the country will leave the EU jurisdiction in this respect. Increased number of insolvencies may result in a longer time of the court and administrative proceedings. Therefore, experts have recommended Polish companies to be more cautious in trading with British entities and advised them to check their financial conditions more closely. The transition period in relations between the UK and the EU is purported to last until the end of 2020, in the current state of affairs between the two.

Author: Alicja Prochniak

Photo – https://www.wnp.pl/rynki-zagraniczne/zaczyna-sie-czas-niepewnosci-co-do-relacji-polska-wielka-brytania,369716.html

Source:

Zjednoczone Królestwo Wielkiej Brytanii i Irlandii Północnej : Informacja o Sytuacji Gospodarczej i Stosunkach Gospodarczych z Polską. MINISTERSTWO PRZEDSIĘBIORCZOŚCI I TECHNOLOGII

https://www.gov.pl/web/wielkabrytania/sto-lat-relacji-polsko-brytyjskich

https://www2.deloitte.com/content/dam/Deloitte/pl/Documents/Reports/pl_Deloitte_Raport_Wplyw_UKPL_PL_FIN_030919.pdf

http://info.wyborcza.pl/temat/wyborcza/handel+zagraniczny+wielkiej+brytanii

https://www.money.pl/aliorbank/publikacja/handel;zagraniczny;wielka;brytania,188,0,1203900.htm

https://firma.rp.pl/nowe-rynki/4762-polski-handel-z-wyspami-po-brexicie

https://forsal.pl/artykuly/1456770,unijny-handel-bez-wielkiej-brytanii-polska-awansuje-na-liscie-najwiekszych-eksporterow-ue.html

https://businessinsider.com.pl/finanse/handel/brexit-widac-w-danych-o-handlu-zagranicznym/5w2nsxc

 

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