PRESS RELEASE : UK and South Korea to launch talks on new trade deal as Korean businesses back Britain with £21 billion of investment [November 2023]

• UK and South Korea to launch negotiations on an upgraded, modern free trade agreement to boost trade between the two countries
• South Korea is the 13th biggest economy in the world and its import demand is set to rapidly grow, driving further demand for first-rate UK goods and services
• UK and South Korea to also announce record £21 billion of Korean investment in green energy and infrastructure projects across the UK, creating more than 1,500 highly skilled jobs

Business and Trade Secretary Kemi Badenoch will tomorrow [22 November] launch talks on a modernised trade deal with South Korea to boost trade and strengthen our relationship with a key ally.

It comes as Korean businesses commit £21 billion of investment into the UK, backing renewable energy and infrastructure projects across the country and supporting more than 1500 highly skilled jobs.

South Korea is the 13th largest economy in the world and its import demand is set to grow rapidly. With around 45 million middle class consumers and an import market expected to grow by 45% by 2035, it presents massive opportunities for UK companies.

The UK and South Korea are both major modern economies with big digital sectors and the current trade deal, negotiated more than a decade ago, doesn’t include digital chapters that reflect the modern economy.

With nearly 80% of UK services exports to Korea delivered digitally in 2021, securing modern digital provisions could unlock big opportunities for UK businesses.

The UK’s trade with South Korea has more than doubled in current prices since our existing trade deal was agreed in 2011. An upgraded trade deal is expected to boost our £16 billion annual trading relationship with South Korea, supporting jobs and livelihoods up and down the UK.

Speaking ahead of the launch, Business and Trade Secretary Kemi Badenoch said:

The government is upgrading our trade deal with South Korea to ensure that our trading relationship plays to the UK’s strengths as an advanced, high-tech economy. This refreshed, modernised deal will boost our world-leading services sector, while also creating new opportunities for UK exports such as in our world leading food and luxury goods sectors.”

The Business and Trade Secretary will launch negotiations alongside Korean Minister for Trade, Industry and Energy Bang Moon Kyu at the UK-Korea Business Forum at Mansion House as part of the state visit by Korean president Yoon Suk Yeol.

At the event, the UK and Korea will also announce a record £21 billion of investments in green energy and infrastructure projects across the UK. With foreign direct investment from Korea standing at £1.9 billion in 2021, this new investment package showcases the strength of the UK-South Korea trading relationship and will create more than 1500 skilled jobs and drive innovation across the country.

This includes:

• £9.7 billion investment by the Republic of Korea Sovereign Wealth Fund into UK assets over the next 10 years to fund UK renewables, green infrastructure and waste management projects;
• £2 billion by Shinhan Financial Group to drive investment into renewable energy and infrastructure projects across the UK;
• £650 million by wind turbine manufacturer SeAH Wind into a state-of-the-art monopile manufacturing facility at the Teesside Freeport site, creating 750 high-skilled jobs by 2030;
• £150 million by food and drink company SPC to establish 200 cafés across the UK, creating 400 UK jobs and employing 200 local businesses in the wider supply chain;
• £90 million invested by Hanwha Phasor in the UK by 2024, of which £18 million is going to its new European Space Research and Development Hub in Cambridge, creating 100 highly skilled jobs

Minister for Investment Lord Johnson said:

Just weeks after my hugely productive trip to Seoul, I’m thrilled to see Korean investors committing £21 billion to exciting new projects which will create jobs and spur economic growth across the UK.

I’m hugely focused on securing greater partnerships with sovereign wealth funds, and so I greatly welcome the Korea Investment Corporation’s £9.7 billion for renewable energy, fintech and life sciences – three sectors the UK is leading the world in.

As we will see at next week’s Global Investment Summit, the UK is one of the best places in the world to invest thanks to the huge growth and innovation that we are fostering in our science and tech sectors. The investments secured today are yet further proof of that and how we continue to strengthen our trade and investment ties with South Korea and the wider Asia Pacific region.”

British brands are also thriving in the Korean market. World-leading UK technology and green energy companies will announce more than £2.5 billion of business wins to South Korea, with Bentley and Diageo also expected to announce more than £200 million worth of contracts in the country this year following support by the Department of Business and Trade.

A new deal would also benefit the nearly 7,000 UK businesses exporting goods to Korea, of which 85% were Small and Medium Enterprises (SMEs). The new agreement is expected to include dedicated support for smaller businesses by digitalising and simplifying customs procedures.

The UK will also work to secure simple and forward-looking rules of origin which provide continuity and long-term certainty while helping as many businesses as possible to benefit from reduced or zero tariffs when exporting to South Korea.

Lord Mayor of the City of London Professor Michael Mainelli said:

It is an honour that this exciting trade communique between two modern economies has been announced here at the Mansion House. The Republic of Korea is a rapidly growing economy with significantly advanced digital sectors. Financial services is the second largest services trade exported from the UK to the Republic of Korea and an upgraded trade deal can further bolster opportunities across Britain.

Additionally, as one of the world’s largest services exporters, this agreement will be key to the UK’s digital transformation ambitions, not just for large firms and conglomerates but also for small and medium sized enterprises seeking to benefit from streamlined and digitalised procedures with customers and businesses in the Republic of Korea.”

Chief Executive Officer at TheCityUK Miles Celic said:

This is a significant step in modernising, strengthening and deepening our partnership with South Korea. It is an opportunity to secure strong digital trade provisions, fostering more robust collaboration between our nations in the exciting growth technologies of tomorrow.”

Korea is a top-three global producer of vital goods such as semiconductors and ships, giving it a key role in supply chains. Deepening our trade links with dynamic Indo-Pacific economies like Korea could mitigate against future economic shocks and builds on the UK’s tilt to the region following our accession to the major CPTPP trading group.

The UK is already a top destination for Korean green investment and Korean companies are utilising a high level of UK expertise in offshore wind as they look to construct the largest offshore wind farm by 2030. A significant share of Korean offshore wind engineering contracts have been won by UK firms and upgrading our trade deal has the potential to strengthen this collaboration.

The news comes as the UK is set to host around 200 of the world’s leading investors at the Global Investment Summit, which will showcase the UK as one of the best places in the world to invest and do business, driving billions of pounds of new investment into every corner of the economy and our leading sectors including science and technology.

Background

• Statistics and data in this document have been sourced from:
  • ONS Imports and exports of services by country, by modes of supply, UK: 2023
  • IMF World Economic Outlook: October 2023
  • DBT Global Trade Outlook – February 2023 report
  • ONS UK total trade: all countries, seasonally adjusted: April to June 2023
  • HMRC UK trade in goods by business characteristics 2021
• UK total trade (imports plus exports) with South Korea was £16.1bn in the 12 months to end of June 2023, an increase of £8.7bn (118%) in current prices compared to 2011.
• The £21 billion investment includes:
  • The Korea Investment Corporation (KIC) plans to invest £9.7 billion in the UK by 2033 as part of an investment collaboration with the Department for Business and Trade. The South Korean sovereign wealth fund will invest in key areas including renewable energy, fintech and life sciences.
  • Korea Development Bank plans to deploy £3 billion through their operations in the UK over the next five years. These businesses will encompass a wide array of financial activities, including but not limited to syndicated loans, project finance, fixed income investments, trade finance, derivatives, and venture capital.
  • KB Kookmin Bank are expanding their UK holdings, allocating a further £2 billion over the next 3 years.
  • Hana Financial Group are increasing their UK holdings, aiming to deploy a further £2.5 billion into UK project finance, green infrastructure, investment banking and securities by 2028. Hana Financial Group will open a Global Treasury Centre in 2024 to support their global foreign exchange trading business in London.
  • Shinhan Bank will sign an MoU with the Department for Business and Trade to invest more than £1 billion in infrastructure and ESG sectors in the UK over five years. Shinhan Bank will collaborate with other Shinhan Financial Group companies to invest an additional £1 billion, totalling £2 billion of investment in the UK.
  • NongHyup Bank (NH Bank) are opening their first UK branch which will grow its assets to £700 million over the next seven years. The UK branch will be based in London, with NH Bank’s first overseas FX trading desk.
  • Britain’s Vertical Aerospace has announced the expansion of its contract with South Korea’s Hanwha Aerospace to include the engineering and manufacturing of advanced tilt and blade-pitch systems, essential components for Vertical’s flagship electric vertical take-off and landing (eVTOL) aircraft, the VX4. Both companies will enhance the partnership throughout the development and certification process and will look to explore more business opportunities as the programme develops. This partnership is projected to be valued at over $1 billion following the commencement of large-scale production of the certified VX4 aircraft.