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United Kingdom: Market Profile

Major Economic Indicators

Table: Major Economic Indicators (UK)
Table: Major Economic Indicators (UK)

Recent Developments

  • As the UK is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures.
  • The UK voted to leave the EU in a historic referendum held on 23 June 2016 and triggered the formal exit process on 29 March 2017. This has not only spawned instant repercussions across the global financial market, but also unleashed ambiguities over the future arrangements for Brexit. As Britain will remain in the EU until the conclusion of an exit agreement, significant changes may take time to unfold. However, a weakened UK economy, aggravated by a choppy sterling, could result in a weaker appetite for imports into the UK over time. Furthermore, Brexit may erode the UK’s dominant position as an investment destination as the country would become less attractive as a gateway to the EU.
  • Hong Kong’s total exports to the UK fell by 9% to US$6.4 billion in 2016, while its imports from the UK decreased by 6% to US$5.7 billion.
  • As one of the most popular investment destinations, the inflows of foreign direct investment (FDI) to the UK amounted to US$39.5 billion in 2015, with China’s contributing more than US$1.8 billion. As of the end of 2015, China’s total stock of FDI in the UK exceeded US$16.6 billion, up from US$202 million in 2006. As the fourth-largest destination of Hong Kong’s outward direct investment, the total stock of Hong Kong’s direct investment in the UK amounted to US$32.1 billion (or HK$248.5 billion) as at the end of 2015.
  • As the No.1 destination for foreign direct investment in Europe, the UK is committed to making the most open, welcoming, business-friendly country in the world. For example, the country cut its corporate income tax to a record low of 20% – the lowest rate in the G7 and the G20 – in April 2015, while the tax rates for those developing intellectual property and investing in research and development can go further lower. More information on the investment environment and the relevant regulations can be found at UK Trade & Investment (UKTI).

Current Economic Situation

The UK's decision to leave the EU on 23 June 2016, followed by the commencement of the formal exit process on 29 March 2017, will certainly lead to a prolonged period of uncertainty, one that will weigh heavily on the country's economic performance. Given that British Prime Minister Theresa May has stated the UK would make a clear break form the EU, the heightened concern over a “hard Brexit” is expected to discourage investment as both local and foreign companies may prefer investing in other EU countries to guarantee free access to the Single Market which represents close to 50% of British exports. As a result of falling investment, growth of the UK economy, despite an easing sterling that bodes well for inbound tourism and exports, is forecast to see a marked slowdown to 1.9% in 2016 and a further deceleration in 2017.

Trade Policy

The UK is a member of the EU that comprises 28 member states, and it follows EU's common external trade policy and measures. As Britain will remain in the EU until the conclusion of an exit agreement, significant changes may take time to unfold.

All EU member states adopt common external trade policy and measures. Meanwhile, 19 EU members, including Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, have adopted the euro as their legal tender. 


No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.

Scheme of Generalised Tariff Preferences

The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.

Anti-dumping Measures

The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-December 2016, the EU did not apply any AD measures on imports originated from Hong Kong.

Other Measures

To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.

For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.

On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.

The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.

Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.

On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.

Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.

Hong Kong’s Trade with the UK [1]

Hong Kong’s total exports to the UK fell by 9% to US$6.4 billion in 2016, after increasing by 1% to US$7.0 billion in 2015. Major export items in 2016 included telecommunications equipment & parts (represented 13% of the total), jewellery (9%), articles of apparel, of textile fabrics (8%), computers (7%), non-electric engines/motors & parts (5%), toys, games & sporting goods (5%), women’s or girls’ wear of textile fabrics, not knitted (4%), printed matter (4%), electrical machinery & apparatus (3%), electrical apparatus for electrical circuits (3%), watches and clocks (3%) and travel goods & handbags (3%).

On the other hand, Hong Kong’s imports from the UK decreased by 6% to US$5.7 billion in 2016, after decreasing by 1% to US$6.1 billion in 2015. Major import items in 2016 included non-electric engines/motors & parts (represented 28% of the total), silver and platinum (10%), work of art, collectors’ pieces and antiques (7%), jewellery (7%), telecommunications equipment & parts (6%), alcoholic beverages (4%), measuring, checking, analysing & controlling instruments & apparatus (3%) and passenger motor cars (3%).

Table: Hong Kong Trade with the UK
Table: Hong Kong Trade with the UK

UK’s Involvement in the Hong Kong Economy

The UK has a substantial involvement in Hong Kong. According to the latest available figures from the Census and Statistics Department, the total stock of direct investment from the UK amounted to US$33.1 billion (or HK$256.4 billion) as at the end of 2015.

The UK is well represented in trading, finance, insurance, retailing and other services sectors of the Hong Kong economy. There are about a thousand companies in Hong Kong with British involvement through direct control, investment or management. Prominent examples/brands include Barclays Bank, BBC, British Airways, Burberry, Daks, Deloitte, Ernst & Young, Glaxosmithkline, HSBC, ICI (China), Inchcape, Intertek Testing Services (Hong Kong) Ltd, Jack Wills, Jaguar, Jardine Matheson Group, KPMG, Land Rover, Marks & Spencer, Pearson, Prudential, Reebok, Rolls-Royce, Standard Chartered Bank, Swire Group, Thomson Reuters, Topshop, Twinings, Unilever and Vivienne Westwood.

Many British companies have used their operations in Hong Kong as a springboard to other Asia-Pacific markets. As of June 2016, there were 124 British companies with regional headquarters in Hong Kong, while another 223 had regional offices.

Reflecting British widespread interests locally, there were some 10,970 British citizens resided in Hong Kong as at the end of 2016.


[1] Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.

Content provided by Picture: Louis Chan
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