aid & development

Aid for trade: The UKs foreign support budget could be used to boost post-Brexit business

Thursday, 27 Oct 2016

With the U.K.'s membership of the single market looking increasingly precarious, the country's trade relationships outside of the European Union are shifting into focus. For Priti Patel, the U.K.'s international development secretary, the country's aid budget is one area which could enhance international trading ties.

Speaking to the BBC in Kenya earlier this week, Patel said that: "British soft power is exactly where DfID (the Department for International Development) ... our aid and other relationships around the world come together to deliver in our national interest ... when it comes to free trade agreements (and) life post-Brexit."

Patel added that she and British International Trade Secretary Liam Fox would work together to gather "intelligence" overseas to inform British firms about new opportunities.

But Richard Whitman, a visiting senior fellow of the Europe Program at the independent policy institute Chatham House, has expressed doubt about these intentions and their potential for success, telling CNBC via telephone that the comments were made in uncertain conditions as "the government doesn't really know what it wants its foreign policy to be post-Brexit."

Patel is known for her pro-trade stance. In 2013, she called for the ministry she now heads to be scrapped and replaced with a "Department for International Trade and Development." Speaking to British newspaper the Daily Telegraph at the time, she said that this would "enable the U.K. to focus on enhancing trade with the developing world and seek out new investment opportunities."

Though Patel is in favor of realigning the British post-Brexit development budget towards business ties, British law could provide a stumbling block for her plans.

Michael Reiss, a managing associate in EU law at King & Wood Mallesons, told CNBC via e-mail that "if aid were to be linked simply to preferential trade benefits for the U.K., then there is a good argument that this would be incompatible (with the country's law.)"

According to Whitman, development and trade policy have always been "closely coupled, but (this) can create problems," because a country's "things to sell are not necessarily the things (its beneficiaries) need."

Reflecting on Patel's intentions, Whitman said that the U.K.'s laws once it leaves the EU could reveal a "closer coupling of interests in security and development." He added that the U.K.'s "relatively small pot of money could lead to specialization that fits in with broader public policy goals, such as the (focusing spending on) Horn of Africa to reduce migration."

According to the U.K.'s budget announcement in March this year, its government will continue to spend 0.7 percent of national income on aid.

Credits: Justina Crabtree/CNBC