Czech bilateral trade with Britain pushed to record levels

Diplomats pushing Czech economic interests across the world have been gathering in Prague in recent days to discuss latest developments and initiatives. Such diplomats, not just from the foreign ministry but from industry and trade, agriculture, and research have multiplied in the past years with the number of dossiers and projects six times more than just three years ago. One of those taking part was Aleš Opatný, the head of the economic and commercial section at the Czech embassy in London. The London office was picked out for its success last year. Opatný expanded on last year’s achievements.

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ʺThe year 2016 was again a record high for trade between the Czech Republic and the United Kingdom. Bilateral trade reached the level of some 290 billion Czech crowns, which, to give a rough comparison, is some 12 times more than it was 20 years ago. This is really a record amount. Although the Czech Republic has a big surplus in bilateral trade with the UK, last year marked a 25 percent growth in British exports to the Czech Republic. The weaker British pound after the [Brexit] referendum boosted British exports globally and to the Czech Republic. It was a significant result of around a quarter higher. This is significant because the balance between the Czech Republic and Britain is now more balanced.

ʺI believe the reason why exports are growing is that it is mutually convenient for Czech and British companies to cooperate. Basically, about 40 percent of Czech exports to the UK are automotive industry products. The UK is now extremely successful in its auto production with about 1.7 million cars were produced in the UK last year, which is a record high for around 25 years. Czech components which are delivered to British companies are helping them to be globally competitive. There are a number of automotive parts ranging from bumpers, parts of engines, seats, wheels, and lights used to assemble cars produced in the UK.

Aleš Opatrný, photo: LinkedIn

ʺOn the other hand, there are significant UK investments in the Czech Republic. The UK over the long term stands as one of the top 10 investors in the Czech Republic and some exports and bilateral trade flows between the two countries are a result of those British investments in the Czech Republic. Fortunately, over the past five years we have also seen some significant Czech investment in the UK. I would like to mention the LINET company, which produced hi-tech top quality hospital beds which re providing life-saving technologies to patients. They have opened their research and development centre in the UK. It’s one of the really high tech Czech investments abroad. Also, Czech companies are investing in energy in the UK and especially in renewables. So, they are helping British companies to achieve climate protection goals.

ʺLast week there was some other investment in the UK by the company EPH but that was more in conventional power plants. Could you say a bit more about renewables because that is not quite so well known about, what type of renewables and what sort of Czech know-how?

Photo: Linet

ʺFor instance, one of the previous investments of the EPH group was in an electricity power plant which used to burn coal but is now being reconstructed to run on biomass. It will help to phase out coal burning power plants in the UK and replace them with more eco friendly technology."

Has the low pound had any other bad effects on Czech investment intentions in Britain or Czech exports to Britain? The crown has probably appreciated by 10, 15, 20 percent over the last year.

"One would think that the depreciation of some 15 to 16 percent would damage exports but that has not been the case for Czech exports to the UK. Last year we saw growth in exports although the pace of growth last year slowed down. Last year I think the growth was around 0.1 percent, but it was still overall growth in Czech exports. As regards a bad impact, I would say it might be more damaging to British importers because foreign products are getting more expensive for them. I mentioned the automotive industry and in the case of the UK only about 41 percent of car parts used in assembly in the UK are made there with around 60 percent made [locally] in some other Western European countries such as Germany. So it might be damaging to those who rely on foreign imports. At this point I have not witnessed any specific damage to specific companies who would for instance have to abandon the trade partnership they had established before.ʺ

We can’t hardly not talk about Brexit or mention it. How much uncertainty do you think it is contributing to both sides of the relationship?

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ʺDefinitely, uncertainty is the biggest enemy of businesses globally. All businesses need to know what the business framework will be within a perspective of two or three years. Uncertainty should definitely be avoided as much as possible. On the other hand, leaving the European Union is such an exceptional project that we can’t really know how the framework for trade will exactly be after Brexit at this moment. So, everyone is preparing. Companies are setting up their contingency plans and they are waiting to see what the final framework will be so they can react properly to it. But at this point they are preparing various plans."

Maybe we could about some of the areas where Czech exporters think they could develop, or where you think Czech exporters could develop? There are a few sectors maybe, civil aviation could be one of them or the nuclear sector because Britain is going ahead with projects whereas they are still being discussed in the Czech Republic. Are those areas which you are pressing to develop?

"Yes of course. Civil aviation is one of the sectors where mutual cooperation between the UK and Czech companies might be beneficial for both sides. Although the UK does not produce some big civil aircraft itself, it is the second most important country in terms of civil aviation globally so there is a huge scope for mutual cooperation and Czech companies have a long tradition, for instance of producing technologies for space exploration and civil light aircraft. These are areas where we are trying to provide a field for meetings between British and Czech companies to cooperate even more. Another sector is definitely energy, as you mentioned. There are very good examples of nano technology being used in the energy field to enhance the capacity of batteries. Various Czech companies are successful in this and can offer batteries which have better standards and larger capacity to be used for instance in e-mobility which is definitely an issue of the day globally. The auto sector might be another area for enhanced cooperation with both the Czech Republic and Britain developing frameworks and technologies for driverless cars and independent semi- autonomous cars.ʺ

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The Czech trade surplus is mainly in manufacturing and there is a deficit in services, especially financial services. But is that changing in any way with perhaps the Czech banking and insurance sector or developing its potential to export more to Britain?

ʺThe City of London is an entity with which it is extremely difficult to keep pace with or for a country to compete with which is the size of the Czech Republic. However, I think it is important that there are already examples of successful Czech cooperation in the field of financial services. Just recently, the opening was announced of the first newly established clearing bank in London. The Czech group PPF announced the opening of a new clearing bank called Clearbank in London which will focus on clearing between British banking houses and institutions. It is one of the examples of the strong belief of Czech capital in the future of the City as a strong European and global financial centre. "