News & Insights | Posted March 16, 2023
Could the new AUKUS deal help the UK finally unlock some post Brexit benefits?
As the UK hails the benefits of the AUKUS security deal, Director Arron Gatley looks at whether it might also create economic opportunities for the UK in the post Brexit world.
One of the arguments deployed in favour of Brexit was that it would give the United Kingdom the chance to build trading relationships with other countries without having to bring the rest of the European Union along for the ride.
There is an argument about how much of a benefit that would be compared to the opportunities afforded by being part of a huge trading bloc but, almost seven years after voting to leave, it’s the reality we all have to face.
The AUKUS (Australia-UK-US) arrangement isn’t technically a post-Brexit deal, but there’s no doubt it’s now easier for the UK to engage in something like this on its own.
What is AUKUS?
AUKUS is a trilateral security agreement between the three countries, aimed at strengthening their cooperation in defence, technology, and security including the sharing of technology and information related to defence and the development of new defence capabilities.
One of the key elements of the agreement is the development of nuclear-powered submarines for the Royal Australian Navy. This will enable Australia to significantly enhance its defence capabilities in the Indo-Pacific region, where tensions have been rising due to the increasing assertiveness of China.
While the deal primarily focuses on security and defence, could it have several potential benefits for a whole raft of businesses in the UK?
Potential benefits of the AUKUS deal for business in the UK:
Technology transfer. The AUKUS deal involves more comprehensive access to US and Australian supply chains, particularly in the field of defence. This could create opportunities for UK businesses to access new technologies and expertise, which could be applied in a range of sectors, including aerospace, engineering, and advanced manufacturing. In addition, it presents significant opportunities for integrated finance (for example, co-investment), design and production across the three nations. Gaining access and making it easier to share intellectual property and technology through these initiatives, will aid the UK’s own advanced manufacturing capabilities.
Defence contracts. With the increased cooperation in defence, there may be opportunities for UK businesses to win contracts to supply goods and services to the military; creating new business opportunities and boosting the UK’s defence industry.
Increased trade. The deal is likely to mean a significant rise in trade between the three countries, particularly in areas such as technology. This will benefit UK businesses that export to Australia and the US, as well as those that are looking to expand their overseas markets. It will also mean that British businesses can explore new markets and export opportunities in Australia and the US, which can help diversify their customer base and increase revenue (which in turn will mean more money in HM Treasury’s coffers). One area of opportunity will be around the trading of critical minerals between the three countries in order to reduce their dependence on China in the years ahead.
UK local businesses. British businesses will also be able to partner with businesses in Australia and the US to access their expertise, knowledge, networks and supply chains. Partnering with businesses in Australia and the US can also help British businesses understand local regulations and cultural nuances, which can be vital in building successful partnerships. Increased trade in critical minerals between the three countries could also create new export opportunities for UK businesses that are involved in the production of critical minerals.
Improved supply chain resilience. The deal will strengthen supply chains by increasing the UK’s domestic manufacturing ability through technology transfers, talent sharing and streamlined regulation and expanding the UK’s ability to stockpile critical products and inputs to provide a buffer against supply chain disruption.
Improved access to talent. The agreement will most likely lead to increased mobility of talent between the three countries, particularly in the security, technology and defence sectors. This could benefit UK businesses that are looking to recruit skilled workers from Australia and the US. Acute talent shortages are being reported across the globe and the increased access to foreign talent that AUKUS can bring will enable knowledge transfer to the UK. To unlock the full potential of AUKUS, there will of course need to be specific reforms to immigration and education/skills policy (for instance, an AUKUS visa or AUKUS skills pathway) to make sure the UK’s talent pool is increased.
Invest in innovation. For the UK, AUKUS can contribute to innovation through creating competitive pressures via access to Australian and US industrial bases. Technology, markets, regulation and firm-specific characteristics are key determinants of the level of innovation in an ecosystem. AUKUS has the potential to expose the UK to a range of new technologies, markets and companies while regulations are streamlined. Defence is often at the cutting edge of technical innovation and can act as a seedbed of knowledge for the transfer of human and technological capital to non-defence applications. This ‘dual-use’ across military and civilian applications means innovation in the defence sector can reverberate positively throughout the economy. Artificial intelligence, cyber and quantum technologies are as applicable to warfare as they are for enhancing supply chain efficiencies, protecting customer data and medical imaging.
Build better relationships. Building relationships with key stakeholders, such as government officials, industry associations, and business leaders, can help British businesses understand further opportunities and challenges presented by the AUKUS agreement. Building relationships can also help British businesses identify potential partners and customers in the Australian and US markets allowing them to access new opportunities for growth.
Overall, the AUKUS deal has the potential to create new business opportunities and enhance cooperation between the UK, Australia, and the US significantly. While the exact impact on UK businesses will be seen in the fullness of time, it is clear that there are several potential benefits that could be realised in the coming years.