Opportunities for UK Businesses in Russia: Key Areas to Work in

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UK businesses in Russia

The UK Department of International Trade provides some useful information for UK businesses in Russia.

This includes them identifying some key areas of opportunity for UK businesses to work in Russia.

Advanced engineering

Russian heavy industry across all manufacturing sub-sectors needs to update:

  • management practices
  • production processes
  • manufacturing equipment

Over 70% of existing capital assets are estimated to be outdated. Russian demand for new metal-machining equipment alone is valued at USD 1.5 billion annually.

There are opportunities for UK companies to supply:

  • energy efficient manufacturing technologies and equipment, such as cleaning and recovery solutions and industrial automation solutions for resource management
  • machine tools and tooling
  • spare parts and components
  • advanced materials for manufacturing and assembly

UK companies can develop their business in this sector via:

  • direct supply
  • Joint Ventures (JVs)
  • taking part in creation and running of engineering centres
  • joint Research and Development (R&D)

Mining

Russia has one of the largest reserves of ferrous and non-ferrous metals in the world. Its domestic mining sector is highly consolidated with many companies that combine extraction with processing, especially in metallurgy.

In the near future, Russia is going to increase state support for its metals and mining companies with extra cash help and by scrapping certain export duties on metals.

The main opportunities for UK companies in this market are in:

  • supply of machinery
  • consultancy
  • environmental and social aspects of the industry

Biotechnology and pharmaceuticals

The Russian pharmaceutical market is reported to have grown by 13.5% in 2013 and is valued at about USD 29 billion. Further growth is expected for 2015.

A Good Manufacturing Practice (AGP) certificate is now a mandatory requirement in Russia during registration of medical products.
Russia’s Pharma 2020 strategy aims to increase innovative drug development and domestic manufacturing output.

The Russian pharmaceutical sector offers opportunities for UK investment in:

  • innovative R&D
  • generic medicines
  • Active Pharmaceutical Ingredient (API) manufacture

Consumer goods

The consumer goods market in Russia was worth USD 597 billion in 2013. It’s an important market for fashion houses and global luxury brands with estimated sales of USD 57.3 billion in 2013.

Russia is also the fastest growing market in Europe for food and drink.

Russia offers opportunities in:

  • premium spirits, beer, and non-alcoholic drinks including premium quality tea
  • high quality confectionary
  • organic, natural, gluten free and locally sourced food
  • fashion, high-end/luxury products including vehicles
  • kids products and toys

Education

Russia is in the middle of the biggest reform of higher education in decades. The reforms aim to enhance the international reputation of Russian universities and ensure universities enter the international top 100 ranking.

The reforms offer opportunities for UK providers to:

  • assist in the process of reviewing Russian Higher Education (HE) provision
  • assist in the design of the new institutions
  • form partnerships with Russian HE institutions to further boost their international reputation

The demand for English language training services and associated products is likely to grow rapidly in the next few years. This is a huge commercial opportunity for the UK.

The English component of the Russian national school leaving exam is currently optional. However, in 2020 a foreign language will become mandatory and the vast majority of students will choose English. English is expected to become a university entrance requirement.

Oil and gas

Russia’s oil and gas market is one the largest markets in the world. It’s valued at USD 50 billion per annum and is predicted to grow in the next 10 to 15 years.

The UK can offer world class expertise across the full spectrum of Russian requirements including:

  • upstream, onshore, mid-stream and downstream processing
  • subsea projects

The Russian petroleum industry has been affected by the EU and US sanctions imposed after March 2014, However, the sanctions only apply to equipment and services suitable for use in:

  • oil exploration or production in waters deeper than 150m in the offshore area north of the Arctic Circle
  • shale fracking

Annex II of Council Regulation № 833/2014 provides a detailed list of such equipment.

There are a wide range of opportunities for UK companies in Russia’s oil and gas sector where sanctions don’t apply including:

  • conventional oil and gas fields
  • construction of LNG plants
  • downstream oil-refining facilities

There is a trend for import substitution. Russian oil and gas companies are aiming to increase utilisation of local equipment in their operations.

UK manufacturers should start to explore different routes into the Russian market. They may need to move away from operating through a local distributor towards establishing joint ventures with Russian enterprises. Local legislation and Russian standards may soon require localisation of goods and services.

Nuclear power

The Russian nuclear industry is a world leader. The state atomic energy corporation,Rosatom has orders for 80+ units. This includes construction of nuclear plants in India, Bulgaria, Turkey, Armenia, Ukraine, Vietnam, China, Belarus, Czech Republic and Bangladesh.

There are opportunities for UK companies to establish a supply chain relationship with Rosatom and also in the decommissioning sector.

Renewable energy

Russia’s vast territory has massive potential for all kinds of renewables. However, Russian interest is growing from a very small base. Russian interest in partnering with overseas companies in the wind, hydro and solar energy sectors is increasing significantly. There are opportunities to supply equipment and expertise.

Russia has recently ratified Renewable Energy Source Development Measures (RESDM). This will increase the volume of renewable energy projects in Russia and open up the market to UK providers of both goods and services.

Electricity grids

JSC Russian Grids is the largest electricity distribution and transmission grid company in Russia. The company cooperates with major foreign energy companies with the aim of applying modern managerial decisions and advanced techniques to its operations.

JSC Russian Grids is moving towards the application of new technologies such as:

  • automated control systems
  • smart grids
  • other systems to improve control and operation

Energy efficiency

There are enormous opportunities for improved energy efficiency across all sectors of the Russian economy and the entire chain of energy use. This includes:

  • energy generation
  • distribution
  • final consumption

Experience economy

Russia offers excellent opportunities for UK firms delivering projects within the museums, heritage and visitor attraction sector.

Russia has 2,631 state and private museums with over 80 million visitors every year. The Russian Ministry for Culture aims to increase visitors to 143 million by 2016.

Museum developers and curators in Russia require international expertise in:

  • preparing funding applications
  • business planning
  • procurement of innovative exhibition equipment and installations
  • appointing project teams, including exhibition designers and other museum specialists
  • delivery of Information and Communications Technology (ICT) solutions

There are also opportunities for UK creative companies in:

  • concept development
  • master planning
  • landscape design
  • interpretative planning
  • lighting and other visual effects
  • branding
  • development of museum/attraction shops with branded products
  • introduction of interactive elements into content

There are opportunities for UK amusement park designers for the design and fit-out of theme parks. Several major projects have been announced recently, including:

  • an ethnographic park under open sky RUSSIA (educational theme park – Russia in miniature)
  • 3 theme parks by DreamWorks
  • 1 theme park by Universal Studios

Financial and legal services

Russia’s financial and legal services sector is growing, but at a slower pace than previously. Russia’s banking system is worth around USD 1.6 trillion.

Moscow has ambitious plans to develop as an International Financial Centre. There are opportunities for UK companies in:

  • more efficient banking practices, particularly lending priorities, risk management, data processing and insolvency rules
  • Mergers and Acquisition (M&A) services
  • privatisation advice
  • dispute resolution consultancy
  • international professional certification
  • English law litigation and arbitration expertise

There will also be opportunities for UK companies as Russia reforms its insurance and pensions industry which is relatively small.

Telecommunications

2% annual growth is expected in Russia’s communication services market between 2014 and 2016. Russia is Europe’s largest market for mobile phones.

Demand for innovative technologies and equipment will be boosted by the:

  • development of Long Term Evolution (LTE)
  • government’s programme to improve communication services in distant regions

Traditional telecommunications services will still be in demand for a long time as the network of 44 million fixed lines only covers about 28% of the population.

There are opportunities for UK companies in:

  • LTE/4G hardware and technologies
  • technologies aimed at development of Value Added Services (VAS)
  • innovative broadcasting technologies

World Cup 2018

Russia will host the 21st FIFA World Cup in 2018, the first World Cup to be held in Russia. The government has developed an infrastructure programme to deliver the project and create a lasting legacy.

The designated budget of USD 20 billion for 2013 to 2018 will be spent on:

  • design and construction of 12 stadiums
  • 101 training grounds
  • 62 hotels
  • broadcasting and media centres
  • modernisation of 11 airports and other transport infrastructure
  • merchandising, retail etc

Nearly 40% of the budget will go into building, or renovating multi-purpose football arenas.

Opportunities arise in a broad range of sectors including:

  • design
  • construction technologies
  • project management
  • transport planning
  • security and access control equipment
  • sport venue fit-out
  • pitch management
  • stadium operations management
  • venue commercialisation
  • overlay
  • fan fests
  • hospitality

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