There are now only 50 days until the United Kingdom leaves the European Union on 29 March. Whilst the final arrangements for Brexit remain unclear, countries around the world, including Israel, are preparing for continued relations with a UK outside of the EU. But what will be the impact for Britain’s relationship with Israel?
We look at three key areas: Trade, Investment and Foreign Policy.
Britain is Israel’s leading export destination within the EU, with bilateral trade repeatedly breaking records in recent years, reaching $7.2 billion in 2016 and $9.1 billion in 2017, according to the Central Bureau of Statistics. But these records are expected to be broken yet again when 2018 records are announced.
For nearly two decades now, Israeli-British trade has been conducted through the EU-Israel Association Agreement, a legal framework that encourages both political dialogue and economic cooperation. Britain will no longer be able to operate under this arrangement. To address this scenario and enable a smooth transition, new UK-Israel Trade Working Group was established and held its first meeting on 29 March 2017 – the same day that the UK invoked Article 50 of the Treaty on European Union to commence its withdrawal process.
The working group, headed up by Britain’s Secretary for International Trade, Dr Liam Fox, last month agreed in principle to a post-Brexit trade deal, with the Jewish state becoming the first country to do so ahead of the UK leaving the European Union.
The agreement was in principle because the EU stipulates that no free trade agreement can be signed by the UK before 29 March.
Upon announcing the agreement, Fox said, “I’m delighted that as Britain prepares to leave the European Union and to ensure continuity for our businesses in both directions, we’ve reached agreement in principle today with our colleagues in Israel.”
“Israel has been one of the most cooperative and productive partners in this relationship where our trade is already strong and set to go further,” he added. “For us, the continuity as we leave the European Union will be a precursor to an even more ambitious agreement in the future.”
Dr Fox visited Israel in November 2018 to discuss post-Brexit trade opportunities, including meetings with Prime Minister Benjamin Netanyahu, major investors and hi-tech companies.
He told Israel’s Prime Minister Benjamin Netanyahu, “As we leave the European Union and Britain takes up its place as an independent state of (the World Trade Organization), we want to push our concept of free trade even further.”
“In a world where the siren calls of protectionism are rising, two free-trade nations like ours need to make the case for global free trade because trade spreads prosperity.”
Netanyahu responded: “Britain is, in fact, our largest trade partner in Europe — one of our most important trading partners in the world — and we value the friendship.”
Speaking in September 2018, Prime Minister May expressed her desire to see not only continuity, but the deepening of the UK-Israel trade relationship following Brexit.
“As the United Kingdom forges a bold new future outside the European Union, we will be seeking free trade deals with our partners around the world. And as a great start-up nation, an engine of enterprise, a world leader in technology and a great friend of Britain, I want to see an ambitious free-trade deal between our countries,” May told a United Jewish Israel Appeal dinner in London.
“And as I have said to Prime Minister Netanyahu, I want to build on this – deepening our links in particular in sectors like agriculture, health, science, technology and innovation.”
An August 2018 report revealed Israel’s investment into the UK rose by 97% in the last year up to £289 million. This increase in investment has resulted in 610 new jobs in the UK and 33 new Israeli companies have established themselves in the UK in the past 12 months
In the year after the referendum, figures show a 33% growth in the value of Israeli tech investments in the UK since Britain’s decision to leave the European Union with further investment expected after the Brexit deadline. There are now at least 337 Israeli tech companies operating in the UK bringing £298 million of investment to the country in the year to June 2018 and there are reports that over 600 Israeli and British tech companies are ready to enter deals.
The third area to watch is Britain’s foreign policy towards Israel. Britain has a strong relationship with Israel, but its foreign policy has not always been faithful in its support.
Whilst having its own autonomous policies in relation to the Jewish State, the UK’s policy on Iran, Hezbollah, Foreign Aid to Palestinians, and matters arising at the United Nations have very much fallen in line with EU policy, which has been generally antagonist towards Israel. Similarly, the UK’s approach to the Israel-Palestinian conflict has regularly criticised Israeli policy without sufficient condemnation of Palestinian terror.
Whilst the UK’s policy on the status of Jerusalem looks unlikely to change at present, pressure will be placed on the UK government to think independently from the EU. Furthermore, the British government, which has always taken a strong stance against Israeli boycotts, are now even more likely to avoid any attempt by the BDS campaign to gain EU favour. For example, despite official EU policy officially opposing the BDS movement, the EU still granted over €5 million worth of funding to ten organisations that promote the movement.
A number of events in the the past year have indicated that there could be a possible shift in foreign policy.
For example, despite decades of blocking potential Royal visits to Israel, the Foreign Office facilitated the first ever official trip of a member of the Royal Family, when the Duke of Cambridge, Prince William, made an historic visit in June 2018.
On the military front, the visit at the end of November of the HMS Ocean, the fleet flagship of the Royal Navy, heralded Prince William’s upcoming visit to Israel. The enormous helicopter carrier docked in Haifa with hundreds of sailors and officers onboard. The event was significant because in the past Britain has somewhat avoided or downplayed public demonstrations of defense cooperation with Israel. Further cooperation was seen when the RAF, together with teams from Poland, Austria, Greece, Italy and Canada, joined the traditional IAF flyover for Israel’s 70th Independence Day.
And in September 2019, Britain’s RAF and Israel’s IAF will take part in a joint exercise, the first time the two countries have held such an event.
As the UK approaches leaving the EU, we pray that the relationship between Britain and Israel will go from strength to strength.