The United Arab Emirates has pledged to invest £10bn in UK clean energy, technology and infrastructure as the oil-rich Gulf state expands a multibillion-pound partnership with the British government.
The agreement, signed on Thursday, doubles the amount expected when the UK and UAE announced a five-year “sovereign investment partnership” in March, with an initial pledge that Mubadala, Abu Dhabi’s state fund, would invest £800m in the UK’s life sciences sector.
Khaldoon al-Mubarak, the chief executive of Mubadala, which signed the deal, told the Financial Times that the UAE had already invested £1.1bn in UK companies and funds, including £500m in CityFibre, a telecoms infrastructure group, over the past six months.
He added that he expected UAE investments to “comfortably” reach £2bn by the end of the year.
“These are all spaces that will grow substantially in the next period and both countries see eye-to-eye in terms of that outlook,” Mubarak said.
The deals come as Sheikh Mohammed bin Zayed al-Nahyan, Abu Dhabi’s crown prince and the UAE’s de facto leader, meets Boris Johnson, the UK prime minister, in a visit designed to deepen economic and trade ties between the two nations.
Johnson and Sheikh Mohammed will sign a separate bilateral agreement designed to strengthen trade, as well as establish “new collaboration” across areas including climate change, regional stability and food security.
This year’s £1.1bn investment covers the acquisition of stakes in seven companies and financing to five UK funds, including some of the money earmarked for the life sciences fund.
Lord Gerry Grimstone, the UK’s investment minister, said the UAE investment would be “the biggest of its type so far in this parliament”, adding that other foreign investors would “sit up and take notice”.
Thani al-Zeyoudi, the UAE’s trade minister, said the Gulf state was seeking to double last year’s non-oil trade of £5.8bn. Overall trade was £12bn.
The UAE, a former British protectorate and the Middle East’s second-largest economy, may also open direct bilateral talks for a trade agreement with a post-Brexit UK.
The UAE is a member of the six-country Gulf Co-operation Council, a regional trade bloc that has been negotiating trade deals as a grouping. But its progress is often glacial. Zeyoudi said the UAE would continue to work through the GCC on trade talks but added that the Gulf state would also pursue its own negotiations to expand business with the UK.
“Either track, the GCC track or the UAE track, is going to be started as early as 2022,” he said. “We in the UAE . . . are going to look at the whole economic engagement between us and the UK government, so we are talking about investments, we are talking about AI, the service trade, commodities, non-trade barriers [and] customs matters.”
The investments and new partnership agreement underscore that the UAE and the UK have overcome low points in their relations, notably after the Gulf state jailed and convicted British academic Matthew Hedges of spying three years ago. Hedges denied the charges and was pardoned.
Relations with former prime minister David Cameron’s government became strained as the UAE pushed London to take a tougher stance against the Muslim Brotherhood, the Islamist movement.
In the wake of the coronavirus pandemic, the Gulf state, which has been one of the most assertive Arab powers during the past decade, has recalibrated its foreign policy to put a greater focus on economic diplomacy.
Abu Dhabi, the UAE’s capital, has also been increasingly investing in technology-related industries and renewables as it seeks to diversify its oil-dependent economy.
Grimstone said he hoped the UAE investments would bolster regional development in the UK and help the “levelling-up” agenda, notably through cash going into projects to decarbonise the economy. He said work on wind farms and new automotive plants would particularly benefit industrial parts of the UK.
“You have to see this in the context of the UK wanting to forge these strong bilateral relationships,” Grimstone said. “Perhaps we haven’t always given as much attention as we should do, in the past, to these strong historic relationships and both our leaders absolutely felt it was the right time to reinvigorate this.”
Mubarak said: “Essentially we are betting on each other: we are betting on the UK’s growth and the UK is betting on the UAE.”
Additional reporting by George Parker in London