Russia's untapped market for our firms

The most recent figures suggest UK investment into Russia is just over £6bn with Russian investment into the UK at around £1.2bn. And we come in twelfth on the list of exporting countries, with around 2.5pc of the total, just over £5bn. Motor vehicles, electrical machinery, nuclear technology, pharmaceuticals, aircraft and tractor spare parts are in greatest demand.

Some 600 UK companies have a physical presence in Russia, compared with, say, more than 2,200 in Turkey. There were just shy of 6,000 UK traders exporting goods to Russia last year. Interestingly, Russia’s third largest source of imported goods is Ukraine.

There are many common characteristics between Russia and China. Both are members of the fast growing BRICs, together with Brazil and India, and both have great economic potential and burgeoning consumer markets. But although China wins on sheer numbers, Russia’s growing middle classes are still attracting serious global interest.

In each of the last three years the CBI has been part of major trade missions to Russia. They have attracted many UK global champions.

An unsaturated car market, with ownership standing at just 200 cars per 1,000 people, has been particularly appealing for Jaguar Land Rover, Ford and Nissan.

Medium-sized firms are also beginning to make breakthroughs. In December 2012, the CBI joined forces with UK Trade & Investment to take the first trade mission for medium-sized businesses to Moscow and St Petersburg, and deals followed.

One of the most interesting involved Chelmsford-based e2v technologies, which clinched a deal with the Russian space centre.

As the world focuses on a diplomatic solution to the situation in Ukraine, UK businesses must hope visa restrictions and retaliatory barriers to trade can be avoided.

But even when calm is restored there will still be challenges. The recent OECD report identified the need for structural reform.

It rightly observed that the Russian authorities were more energetic fighting corruption and strengthening legal protection for businesses on the ground, but low market valuations and big capital outflows indicate many firms are still to be convinced.

John Cridland is director-general of the CBI

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