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Keynote Speech to the 11th Russian Economic Forum

The Rt. Hon. John Hutton MP,  Secretary of State for Business, Enterprise & Regulatory Reform
The Russia Investment Roadshow 2008, Queen Elizabeth II Conference Centre, London,  21 April 2008

Good morning and thank you for the opportunity to address this Russian Investment Roadshow. It’s a real honour, and particularly apt, that the biggest Russian business event outside of the country be held in London - the global hub of international commerce and finance.

A strong and productive relationship between Russia and the UK is important to both our economies. To promote trade, boost essential investment and ensure the security and supply of critical resources such as energy.

And the presence here of so many leading speakers, Government representatives and business people shows, I believe, how committed our countries are to making this relationship successful.

Where we are now

There are challenges. But although we may sometimes disagree on certain issues, we are both certain that the jobs, wealth and the opportunity generated by business between Russia and the UK are essential to our future prosperity.

It remains “business as usual”. The benefits of our existing trade and investment relationship are already clear.

In recent years, trade between our countries has doubled. Last year, two-way trade in goods and services totalled over £10 billion. UK exports of goods to Russia increased by almost 40% to £2.8 billion.

And we believe that if this strong growth continues, it won’t be long before trade levels can double again.

The UK is already the largest foreign investor in Russia. And there are now over 1,000 UK companies, many of them household names - operating in the Russian economy.

Cadbury-Schweppes’ largest factory outside the UK is now in Russia. And Pilkingtons have set up a state-of-the-art glass factory just outside Moscow.

UK retail chains such as Kingfisher and Monsoon are already well-established in the country, joined by Marks & Spencer, Mothercare and Body Shop, who operate through local franchises.

The UK’s world-leading expertise in financial, accountancy and legal services is also evident now in Russia - with UK companies from these sectors performing strongly. Barclays Bank recently entered this market and HSBC is significantly increasing its Russian investments.

As a result of these businesses and others, UK investment in Russia is growing today more quickly than that from any other country. And we very much welcome this.

Russian businesses too are investing more money in the UK. Working in sectors as diverse as energy, property, lingerie and football, many leading Russian business people and companies are choosing this country as their base. And we strongly welcome that too.

This includes financial services companies – Troika Dialog, Uralsib, VTB and KIT Finances, who now have bases in London. The Russian property dealers, PIK are investing in office development projects in London. And last year, Russian companies accounted for a quarter of the value of all Initial Public Offerings in the UK.

Now we believe very strongly we can build on this track record of success. And our Government is focussed on supporting and strengthening the bilateral commercial relationship to ensure Russia remains a leading trade and investment partner for the UK in the future. And I am very confident that the Russian Government shares that commitment.

To help boost the opportunities for UK companies overseas, Russia has been identified as a key market for the UK in UKTI’s five year strategy - “Prosperity in a Changing World.” And my Department has significantly increased UKTI resources based in the country to support the rising numbers of UK companies, who are interested in this important market.

Now I hope to visit Russia myself later this year.

And following his successful trip there last October, Lord Digby Jones will be returning for the St Petersburg Economic Forum in June.

Andrew Cahn, UKTI’s Chief Executive also visited Russia recently, where he discussed plans to restart the UK-Russia Intergovernmental Steering Committee on Trade and Investment.

This newly streamlined group will hopefully meet – with a more business focused format - for the first time, during my own visit to Russia in October.

This stronger focus and dedicated resource on the ground, reflects our belief that Russia is open for business and has huge potential for substantial long-term growth.

But for this to be realised, trade must be based on an open, market rules-based system. And I welcome the progress Russia has already made in preparing to become a full World Trade Organisation member. And I now look forward to the early completion of WTO accession negotiations to enable this membership to happen. And then for the EU and Russia to open negotiations on a Free Trade Agreement.

Evidence from the World Trade Organisation demonstrates that international trade works best when conducted through open and transparent markets, built on robust, reliable and well-understood regulatory systems. And nowhere would the benefits of this work be more clearly seen than in Russia’s energy industry.

Business in this sector forms an important part of our bilateral economic relationship. UK investment in Russia’s oil and gas sector includes BP’s $6.75 billion joint venture with the Russian oil company, TNK, and an even larger investment by Shell in the Sakhalin II oil and gas project.

These and other successful energy deals have helped drive Russia’s strong economic growth in recent years, and enabled the country to pay off its Paris Club debt. It has also built up substantial reserve funds of over $150 billion.

Now as world demand for energy continues to soar, the opportunities for Russia to profit even further are, I believe, immense. But sustained investment in infrastructure, low carbon technologies and other resources is essential to maximise these opportunities.

Our own experience in managing the UK Continental Shelf has demonstrated that open, competitive markets are the best way to deliver the confidence and certainty investors need.

Clear, fair rules enable both private and public sector energy suppliers to compete on a level playing field, and deliver the necessary investment in innovation and technological expertise to fully exploit energy resources.

As ensuring sustainable, secure energy supplies becomes one of this century’s biggest issues, all countries must apply these principles across their energy markets. And as the market for low-carbon energy solutions grows – all Russian and UK companies have an interest in ensuring that this happens.

This is very much just a snapshot of the real business opportunities that Russia’s dynamic, growing economy now offers UK companies. And I want more UK companies to have the ambition and the means to make the most of them.

Now hopefully today, this Forum is a chance to discuss these issues, and also our business ambitions for the future. I remained convinced that Russia is open for business. And I hope you will work with us to ensure you and other UK companies have the aspiration, contacts and the chance to operate and profit in Russia. Creating jobs, business and wealth in both our countries.

Thank you.

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