London RBCC Business Forum

Your Royal Highness, Your Excellency, Ladies and Gentlemen
It is a great honour to be able to address you today.
 
When asked to prepare for this session, I was told I have 5 minutes, and the session is to cover a review of the past 12 months and the outlook for the year ahead.
 
So here goes! To encapsulate it - the Russian economic climate over the past year has proved as diverse as Russia's meteorological one - but although we may have been approaching sub-tropical overheating last year, we are certainly not into Arctic territory this year.
 
Indeed, the steepness of the fall in Russian GDP in the first quarter of 2009 (-9.8% year on year) is in part related to the strength of the economy this time last year. It's undeniable that the bare economic statistics indicate stormy times - industrial production fell 17% in May, capital investment 23%, and retail sales 5%. Official statistics indicate unemployment of almost 10%. Banks in Russia, concerned about bad debt, have not yet resumed lending on a wider scale - and this could slow a broader economic recovery.
 
 But equally, inflation is slowing, gradual rouble depreciation has been well managed. And the Russian government is now in a position to boost spending through increased oil revenues and a generous fiscal stimulus package, the effect of which has yet to kick in.  Russian reserves stand at over $400 billion. Plus, Russian household debt is relatively low. 
 
Whatever the economists predict, and they rarely agree, as the Minister has said, we, and crucially, you, UK businesses, judge that Russia is indeed open for business. Just last year the leap in bilateral trade by over 30% revealed the huge potential for the bilateral commercial relationship. Russia moved to 13th export market for the UK.  The UK remains the largest foreign investor in Russia. While this year the initial statistics don't look so promising, we are now discovering other things about the commercial ties between our countries.
 
First, that the drive for an export-led exit to the recession in the UK is leading many British companies to seek export support. The UK Trade & Investment team in Russia is fielding an increasing number of enquiries from potential exporters. For British companies seeking to diversify export markets, Russia is among the most popular 5 markets researched via the UKTI website.
Recent trade missions, including an Olympic mission to Sochi in March, have been highly subscribed. To give you a sense of the variety of activity - in May alone UKTI Russia organised missions on metal cutting, airports, beer and pubs. This month the focus is Information and Communication Technologies, Life Sciences and of course Oil and Gas at the Moscow Exhibition. Russian Railways and Russian port industries have also visited the UK  in recent weeks.  As Lord Davies has just said, we are "making it happen".
 
Second, we have learnt that much of what the UK has to offer is very much in demand in today's Russia. The UK's strengths in energy and power, life sciences, ICT and advanced engineering, are matched by the stated priorities of the Russian government to modernise production, innovate, and focus on energy efficiency. A recent survey of Russian businesses by the RSPP shows that 36% of respondents are implementing energy efficiency measures as a result of the crisis.
 
 Third, British businesses are voting with their feet - Barclays Bank and HSBC have this month appeared on the Russian high street with retail operations in Moscow and St Peterburg. That is a vote of confidence. Astute readers of the Russian press will have learnt of UK retailers' persisting lively interest in the Russian market - whether it's Castorama (Kingfisher), Debenhams, or Harvey Nichols. Russia is persistently ranked in the top 3 most attractive global retail markets.
 
Lastly, this past year has seen the Russian and UK governments working ever more closely as our leaders have discussed tackling the global financial and economic crisis in the G8 and G20, and in bilateral meetings. There have been meetings between President Medvedev and PM Brown, and Alexei Kudrin and Alastair Darling in London, plus the 4 Russia visits of various "Lord Ms" - though that was not the sole criteria for their travelling to Russia - that is the Lord Mayor in September, Lord Mandelson in October, Lord Malloch Brown in March ,and Lord Mervyn Davies in June. Between them, they have discussed international financial regulation, economic restructuring, tackling protectionism, through to supporting start-ups in nano-technology. Work continues on all these important themes.
 
And in the coming 6 months we look forward to the next visit of the Lord Mayor to Moscow, where we seek to promote closer ties between the City and Russia, and the next meeting of the UK-Russia Intergovernmental Steering Committee on Trade & Investment in the autumn in London.
 
 It would be remiss to finish without mentioning our newly signed MOU - a Host2Host agreement on London Olympics Summer 2012 / Sochi Winter 2014 which aims to convert Olympic sporting ambition into economic success. And this is about much more than icehockey stadia - under this rubric we hope for example to explore together how mobile and wireless comunications can support major sporting events. At how to stage an energy efficient games. And, with the lawyers, at how to protect the Olympic logo.
 
In current difficult times it's all the more important that we join forces. The British Embassy team in Moscow and UK Trade and Investment look forward to working with your team, Your Excellency, with RBCC and with all the businesses present today in promoting these ties.

 

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