A changing world and new technologies are
bringing the UK and Australia still closer together.

The dramatic events of 2001 have forced the world to embrace change – something Britain has recognised in relation to its position in the world, and with its trading partners and allies, including Australia.

British Prime Minister Tony Blair eloquently expressed these sentiments when he addressed the Confederation of Indian Industry in Bangalore in January 2002. “The days of the empire are long gone,” he said. “We are not a superpower, but we can act as a pivotal partner, acting with others to make sense of this global interdependence and make it a force for good, for our own nation and the wider world.”

With the emphasis on the new role of the United Kingdom as a partner, there could be no better example of the benefits of such partnership than the last century of close connections between the UK and Australia.

“It is a partnership of two nations,” Australian Prime Minister John Howard said at the 2001 opening of the Magna Carta monument in Canberra, a gift from the UK to mark Australia’s 100th year of federation as a nation. “Although in different parts of the world and often being cast in very different situations, we are nonetheless two nations that still have great affection towards each other, who still feel in the same way about certain fundamentals of life.”

The Australian connection
With strong economic and trading links around the globe, Australia stands in a unique situation in the Asia Pacific. It is steadily expanding its ties with Asia, America and now Europe. After weathering the Asian economic crisis in the late 1990s and the decline in trade with these local markets, Australia turned its focus to the US – and particularly to European markets. Directly after the Asian crisis, for example, Australian exports to the EU rose by 33%.

“Europe may be a long way from Australia, but that means nothing in today’s world,” said Australian Trade Minister Mark Vaile in June 2001. “We have seen our total merchandise trade with the EU almost triple over the past 15 years, and trade in services has grown in a similarly impressive manner. Today, the EU is Australia’s largest trade and investment partner.”

The UK is crucial to this developing trade and investment relationship with Europe. For most Australian exporters, the UK is the obvious gateway to the continent. Cultural familiarity, the common language, shared values, family ties, familiar legal and political institutions, as well as its political and economic stability – they all make the UK an attractive destination to set up operations in Europe.

Personal bonds between the two nations are even deeper, with the UK being Australia’s second largest source of migrants and third largest source of tourism. More than 1.16m Australians were born in the UK, while 1.6m Australians have a parent born in the UK. The two peoples are also inveterate travellers: in 2000, some 777,000 Australians travelled to the UK, with 613,100 Britons visiting Australia in the year to June 2001.

Equally important is the long history of defence and security cooperation, with Australian and British forces working alongside each other in both war and peacekeeping. This relationship is consolidated by bilateral security and defence arrangements, including the Five Power Defence Arrangement with Malaysia, Singapore and New Zealand.

Brits Down Under
Trade. The UK is the fifth largest exporter of goods and services in the world, impressive given only 1% of the world’s population. There is a current drive to actively embrace new markets, particularly in the Asia Pacific. Australia can be considered an excellent launch pad to the region, in addition to offering a strong domestic market, the third largest economy in the Asian region after Japan and China, and a GDP higher than the combined GDPs of Malaysia, Singapore and Hong Kong.

Hence, Australia is already the third largest market in the region for UK goods, and the second largest for services imports. Total two-way goods and services trade was worth around £7bn (A$18bn) in 2000, with the UK being Australia’s third largest trading partner and fourth largest supplier of merchandise imports (7.1% share).

UK visible exports increased by 29% in 2000 to £2.6bn (A$7.2bn), but with the slowdown in the Australian communications industry, this fell back 14% in 2001 to £2.3bn (A$6.4bn).
Leading imports from the UK include aircraft and parts, medicaments, telecommunications equipment, printed matter and passenger motor vehicles.

Investment. The UK is the second largest source of cumulative foreign investment in Australia (A$178bn in 2000) and the second largest source of direct investment. More than 100 British companies have set up regional operations in Australia, major UK investors including Shell, Vodafone, BP, Reuters, P&O, Cadbury-Schweppes, HSBC, Unilever and Virgin Airways. With a long history of cooperation in the area of defence, Australia is one of the UK’s top 12 defence sales customers. Major UK defence companies operate in Australia, including BAE Systems, GEC-Marconi, Rolls-Royce, GKN-Westland Helicopters and Racal.

Attractions for UK businesses include Australia’s competitive costs, top-class support services and a highly-skilled computer-literate workforce. Other advantages are the advanced ICT infrastructure, well-regulated financial system, a well-managed economy, familiar legal and business practices, technological adaptability and a multicultural, educated and multilingual workforce.

The Australian economy is resilient and well managed, enjoying a decade of continuous growth and low inflation. It also has an open economy, encouraging investment from both the US and the EU.

In recent years reforms have made Australia’s economy more dynamic and internationally competitive. These include the floating of the Australian dollar, deregulation and reform of financial systems, lower corporate taxation, new competition in the telecommunications industry and greater flexibility in the labour market. Tariff levels have been progressively reduced and general tariffs are now 5% or less.

Trade Partners UK has identified a number of priority sectors where there are particular opportunities for British businesses. These are:

• creative and media;
  
• food and drink;
  
• ICT;
  
• oil and gas;
  
• telecommunications;
  
• mining;
  
• health care; and
  
• engineering.

Aussies in the UK
Trade. The UK is the eighth largest destination for Australian exports, and the only European economy in Australia’s top 12 export markets.

The UK remains Australia’s largest market for wine – Australian wine now has a 21% market share and is ‘neck and neck’ with France, an extraordinary achievement (see next article). Nearly half of all Australian wine exports are drunk by the British. Other key exports to the UK include non-monetary gold, coal, medicaments (including veterinary products) and lead.

Investment. Remarkably for its size and distance, Australia is the UK’s seventh largest investor. The UK dominates Australian foreign direct investment into Europe, taking around 70% of the totals. From Australia’s perspective, the relationship is even more vital, the UK being the second largest destination for Australian investment abroad – A$65bn in 2000, second only to the US (A$157bn).

There are now more than 700 investments in the UK, with a growing proportion in financial services, computer software and e-commerce.

Some Australian companies have extensive operations in the UK, with the financial services sector a significant case. AMP, planning on expansion in the UK, already earns half its income there, serving 5m UK customers and employing 9000 people. National Australia Bank employs 16,000 people through its UK subsidiaries Clydesdale, Yorkshire and Northern Banks.

The trend to operate in the UK began with Rupert Murdoch’s News Corp, which began acquiring media assets in the UK (and the US) more than 20 years ago. Now key investors in the UK market include Lead Lease, Westfield Holdings, AMCOR, the Commonwealth Bank, Brambles, ANZ and Boral. In 2001, Australian resources giant BHP merged with UK mining company Billiton.

Besides the cultural ties and shared language, drawcards for Australian businesses include the UK’s flexible labour laws, tolerance of multiculturalism, the developed but low-cost telecommunications infrastructure, low personal and corporate tax rates and a large, skilled, adaptable workforce.

The UK economy is also enjoying a period described as a “remarkable performance” in the December 2001 annual report by the International Monetary Fund. It said: “The current nine-year expansion marks the longest period of sustained non-inflationary growth of the UK economy in more than 30 years... inflation has remained subdued, and unemployment is at its lowest level in a quarter century.”

The city of London is another key attraction, the world’s premier financial centre, endorsed by leading surveys: both the Healey and Baker European Cities Monitor 2001 and Fortune magazine’s ‘Best Cities for Business’ survey ranked London again as the number one location for business in Europe.

London is attracting a steady flow of ICT companies setting up from Australia (and elsewhere), and a rising level of investment by international companies involved in high technology, telecommunications and e-commerce.

Invest UK’s annual results announced in July 2001 reported record levels of project success, including 15 Australian investments creating 1250 jobs. Stan Roche, Head of Invest UK in Australia, says that the UK’s world-class information and communication technology sectors are well placed to take advantage of the UK’s pro-business environment.

Australian IT&T companies identifying UK opportunities include Brisbane-based Manusoft, which is planning to create 50 jobs to design manufacturing process software in the British Midlands. National Australia Group made one of the largest investments in the UK last year, with a A$245m European telephone banking centre in Kilmarnock, Scotland, creating 500 jobs over the next two years.

International gateway
Many Australian investors choose the UK as the best location for targeting the single European market, with its free movement of goods, services and people creating a massive market of 378m consumers.

Equally, Australia is viewed as an attractive destination for its strategic position in the vibrant Asia-Pacific region. Australian-based companies are ideally positioned to do business in this region and Australians are experienced in doing business with Asia – almost 800,000 Australians speak an Asian language.

With symmetries such as these, the sizeable trade and investment ties between the UK and Australia show every sign of continued expansion.

Article: Marie Nancarrow,
British Consulate-General,
Sydney.
Website: www.uk.emb.gov.au