Ukrainian Trade Mission to the UK: A New Chapter for UK-Ukraine Post-Brexit Future
Brexit is one of the most polarizing events that has been making headlines in the world news over the last several years. The UK’s withdrawal from the European Union has left a mark on the economic and political relations between the United Kingdom and all its strategic partners, including Ukraine. Still, there is always room for making predictions about the future and what it will hold for both countries in the years to come.
The UK was already one of Ukraine’s biggest trading partners. As an example, in October 2020 the countries signed a comprehensive political free trade and strategic partnership agreement. Among other things, the deal aims to secure continued preferential trade for businesses in both markets.
In order to explore all trade opportunities, to strengthen business and tech connections, and to find new opportunities between the two countries Sigma Software Group with the support of the USAID Competitive Economy Program arranged the Virtual Ukrainian Trade Mission to the UK. Because of this ambitious initiative, speakers from our company, Emerging Europe, Embassy of Ukraine to the UK, Global Outsourcing Association, Innovecs, TEBIN, Corefy, Avitar, AltexSoft, and Genova Web Art gathered together in January 2021 to hold a public discussion.
Speakers discussed how the UK-Ukraine strategic partnership agreement can enable UK business growth in the post-Brexit age. If you are interested in exploring new ways to run your international tech business, here’s a recap of the meeting.
Organizers: Sigma Software Group
Partners: Embassy of Ukraine to the United Kingdom of Great Britain and Northern Ireland and Export Promotion Office
Media partner: Emerging Europe
Andrew Wrobel: Hello everyone. My name is Andrew Wrobel, and I am a public partner at Emerging Europe, a news community and intelligence platform which is focused on shaping the future of 23 countries in Europe. Today we're going to explore all trade opportunities especially in the tech sector between Ukraine and the United Kingdom. Without further ado, I would like to start by inviting Taras Krykun, who is the Minister-Counselor for Economic Affairs at the Embassy of Ukraine to the United Kingdom to start with a few opening remarks to give us more information about the trade deal that the UK and Ukraine signed a few months ago.
Taras Krykun: Thank you, Andrew. Hi everyone. Let’s talk about the opportunities that come from the UK-Ukraine strategic partnership agreement and what it brings for tech entrepreneurs.
I’d like to give a short recap of where we are right now in terms of Brexit. From January 1st, the UK has entered a new era of trade, when it started its independent trade policy and the building of new trade partnerships. It means that EU trade agreements no longer apply to the UK. As a member of the EU, the United Kingdom had more than 40 trade agreements covering more than 70 countries, including Ukraine.
The main task for the UK was to somehow secure continuity in trade. This process was also called a “rollover” of trade agreements. The UK tried to replicate agreements it had as an EU member by striking new agreements. In some cases, this was not relating to technical work. The bespoke solutions were applied to countries like Ukraine.
Can the new agreements secure preferential access and treatment? The UK has already secured and agreed on deals with more than 60 countries. Some of these agreements were already fully ratified, and some provisionally applied. In terms of Ukraine, we started the preparations immediately after the referendum in 2017. Since then we’ve had more than 35 rounds of consultations. In October 2020 the agreement was signed, and from January 1st it has been in force.
What does this agreement mean for Ukraine? First of all, it strengthens and secures the political and trade ties we have. It brings our relations to a new strategic partnership level, but what’s important is that it is a starting point for even further liberalization. In a nutshell, this agreement is the largest bilateral treaty agreement Ukraine has had with one country. It covers goods and services because not all the free trade deals cover services and other areas as well. Starting immediately from this year, 98% of our goods will receive free access to the UK market. In 2023, 100% of our goods will have full access. We will have only 36 products covered by tariff rate quarters.
In the preamble of this agreement, you will find the most important facts about Ukraine and the UK. For us, its important points are about the recognition of Russia’s actions, commitments to enhance cooperation, and so on.
- In title one, we can find the general principles important to both countries, such as human rights, fundamental freedoms, and principles of the free market;
- Title two is about political dialogue and cooperation in the field of foreign security policy;
- Title three is about justice, freedom, security. It's about the mobility of workers, involvement of people, and the start of the visa regime;
- Title four is the core of the text. It regulates trade for both goods and services;
- Title five is about economic cooperation in 26 different spheres;
- Title six is about the financial assistance, provided by the UK government to achieve this agreement;
- Title seven is about the institutions and budgets we have to oversee and implement in the agreement.
How do we implement the agreements when we talk about IT services? In the agreement, you will find such terms as “computer services” or “computer and related services”. They cover all the services that our exporters and UK exporters can provide and this is defined by the United Nations classifications.
The UK and Ukraine agreed to liberalize the establishment and trade of services in the IT sector. When we talk about the liberalization of services, we mean two main categories:
- The first one is about market access. It’s about how our suppliers enter the UK market and vice versa. If one country has already liberalized its market then no restrictions may be applied;
- The second is the national treatment of suppliers. Once the supplier has entered the market, the other party cannot restrict it, or cannot discriminate this supply against its own suppliers.
How do we treat these provisions? There are four main types of software services supply used by WTO:
- Mode number one is cross-border supply when you supply services to the customers in another territory. For example telephone calls;
- The second mode is when you consume this service abroad. For example, when you're a tourist or you receive health care in another country;
- Number three is a commercial presence. It is when you establish a branch or subsidiary in another country and provide services using this branch;
- And the last is when you send your employee to go to another country and provide the service there.
When we talk about services, we need to take into account all these different types of modes. All four modes have been liberalized. It means that both the UK and Ukraine treat the establishment and supply of these services the same way they treat their own suppliers.
Andrew: Taras gave a brief overview of what's waiting for us in the UK and also in Ukraine. Now I would like to have a look at what the actual situation is in the UK. We have Kerry Hallard with us today, the CEO of Global Sourcing Association and also the chairwoman of the Global Technology and Business Services Council.
Kerry, let's have a look at the situation in the UK right now. Where do you see the tech industry in the UK, what do tech companies or IT services buyers tell you when they speak to you? Where are we now?
Kerry Hallard: Let's take a step back and look at what actually happened when the pandemic hit. Obviously, it was a massive shock for everybody. There was a huge amount of mobilization that was implemented to create opportunities for people to work from home. The global technology and business services industries responded incredibly well. All those organizations coped really well to get their people to work from home. They didn't just keep the lights on for their customers in the UK, and all around the world, they actually kept the wheels turning.
Trust and partnerships increased during the pandemic and they continue to increase. The way that organizations partnered and collaborated around the world was phenomenal. Despite the pandemic, we saw a one percent growth in the industry in 2020. We are predicting that the industry will grow between three and five percent in 2021.
The digital transformation happened literally overnight and it happened successfully. That is why the projects that the UK businesses were thinking about for 3 to 5 years suddenly were forced to be put into practice. And now they have a huge appetite to drive more and more technological developments. We're calling it a period of tech acceleration. We believe it will continue at a rapid speed. This is a very positive response and a hugely positive prospect for the industry.
Andrew: And do you think that Brexit will have an impact on the industry as well in any way?
Kerry: Right. Obviously, Brexit wasn’t good news for our industry. We did a poll across our membership base the day before the referendum: 80% of our community wanted to remain in the EU. There remains disappointment that Brexit actually happened.
There was a slogan from Boris Johnson that was, “Let's get Brexit done.” The truth of the matter is that Brexit is not done. It's not close to being done. We have 25 or 28 working parties that are looking at negotiating key aspects of what Brexit is going to look like. If we look at what the Brexit negotiations with the EU have focused on, it's been predominantly on goods. The services sector has remained largely untouched and given the size of the services and industry, it's almost farcical that they've done very little with them.
Andrew: Do you see opportunities or challenges in that context for the development of the sector, but also for potential cooperation with service providers from other countries?
Kerry: The number one issue we've got is that we don't have enough talented people in the UK. And Brexit has absolutely accelerated that. We will be looking at accessing the global talent pool to help us drive these digital transformations. One of the things that we realized was an opportunity to reposition the industry, paint a positive future of global technology and business services.
We reached out to a whole host of different industry associations around the world and said that this is an opportunity for us to not just look at our national approaches but to actually look at the global response. There's a real risk because so many people all around the world have been furloughed. Unemployment has already, despite furlough, reached an all-time high. There's a feeling that we should become very protectionist and nationalistic in our employment approaches. But the reality of that situation is we don't have anywhere near the amount of skilled workers to do the work that we need to do in the digital transformation space.
Part of the work that we've been doing is reaching out to those other industry associations. We created the Global Technology and Business Services Council which is an alliance of 12 industry associations around the world. It focuses on the ongoing importance of the global talent piece and how countries should not become nationalistic and cannot afford to become nationalistic in their approach.
I believe that the UK is going to continue at an accelerated level to access the global talent pool for technology. We've got a 65% requirement to upskill British workers to fill the requirements that we've got at the moment.
Andrew: When you answered my first question, you said that there is an increase in trust and I found it interesting because it means that maybe British tech companies and British IT services buyers are now more truthful towards service providers from other markets. Do you see that as an opportunity for service providers from countries like Ukraine?
Kerry: Absolutely. The UK has historically always been a very avid user of offshore delivery destinations. It's always partnered with different countries around the world. That is going to continue unabated.
Ukraine has a huge opportunity. It’s a very talent-rich and cost-effective destination. It is near shore and that is one of the things that we'll see change with major UK buyers if they're looking to build resilience. They're looking to build a much more blended global delivery footprint, so it's not everything being off far shore. It's actually having a good blend of far shore and near shore. So, Ukraine has a lot of potential to increase its trading relationship with the UK for technology and business services. At the moment about 62 million is exported to Ukraine for business services. But we're currently exporting closer to 25 billion to India, so as that rebalances and changes you can see just how big the opportunity is.
But, my word of warning, and I’ve said this on the stage in Ukraine a number of times before, is to really build your brand profile for the technology work that you actually do. I know there are some really great companies. But I still don't think Ukraine makes enough noise about its potential to deliver technology services to UK companies.
Andrew: For this part, I’m going to welcome in the rest of the panel right now, so we have a wonderful group of Ukrainian companies starting from software developers to law firms:
- Den Melnykov, one of the founders and CEO of Corefy
- Aleksandr Nikitin, the CEO of TEBIN
- Maria Skakun, senior associate and head of business development at Avitar Group
- Alexandra Govorukha, international PR lead at Sigma Software
- Alex Blishun, director of client engagement at AltexSoft
- Pete Smith, VP for sales for Europe at Innovecs
- Arthur Korniyenko, the founder and the CEO of Genova Web Art
Guys, I would like to ask about both what Kerry was saying about the opportunities in the UK market, and also the trade agreement that Taras was describing to us earlier. Where do you see opportunity for the tech sector in Ukraine or service providers out of Ukraine?
Maria Skakun: It is a huge opportunity for us to show the increasing level of Ukrainian services, especially in the tech industry. Ukrainian people were always very creative. It is the perfect moment for this cooperation of UK stability and Ukrainian creativity from our perspective. For example, we are working day to day with Ukrainian IT businesses and we see an increasing level of all of the skill sets that we have. From the view of our company it will be very special to show the level of, not only the development services in Ukraine, but also the legal services which we are providing.
Alexandra Govorukha: Ukraine is full of creative people. We have around 220,000 top-notch developers. I see good opportunity for connecting with the UK market considering Brexit and new ways of cooperation. Also, it's important that we have a lot of startups and startup initiatives and IT service companies that work with startups and help them to grow.
For example, Sigma Software has around 20 partner products in its portfolio. We help our clients by integrating ready made products that save their time and reduce their costs. Moreover, we share our vast business network with our customers and help them to find investors, clients, partners, and so on.
It's also important to mention that some people in the UK probably have their own perceptions of Ukraine as a post-Soviet country with a poor reputation regarding corruption and/or war. But these things are changing and we work hard on building a new Ukraine with the help of tech people. This sphere is number two in Ukraine by expert services, and young people are ready to work with the Europeans. We have a similar mindset and strong connections with Europe. It would be great to build new bridges with the UK startups and enterprises.
Alex Blishun: One of Taras’ slides was headlined with the “New era”. I believe that's a good term to use because the great talent pool that Ukraine has can definitely bridge the gap between the needs of the UK companies for skilled workers as well as the competitive prices compared to the local market in Ukraine. But on top of that, we can also compete on quality with some of the offshoring destinations like Asia or Latin America. We definitely have almost the same time zone, which creates a great communication overlap. For example, we provide data engineering and data consulting services and just two or three years ago the UK companies were hesitant to share data outside the UK, especially outside the EU. It was nearly impossible after GDPR was introduced. So this agreement will definitely help to build this awareness and trust between businesses in the UK and Ukraine.
Pete Smith: I would echo some of the comments that we've already heard today. People in the UK feel far more comfortable dealing with a Ukrainian company than perhaps they would somewhere that's in a totally different time zone as mentioned before. Our company started talking to a number of companies already and has received really good responses from people.
It doesn't always come down to price. It's really based on quality of service and professionalism. The level of professionalism that you get from Ukrainian companies is far higher than other companies. There are huge opportunities out there and we're really looking forward to growing those in the UK.
Den Melnykov: There are a lot of opportunities and this trade agreement as a framework is bi-directional. It's not only just the invitation to use the talent inside the country and supply IT services. It’s to help UK companies to scale or to gain success in other markets. It's also about having another way that UK businesses can reach markets here. Ukraine could be a gateway or a trusted partner in this part of the world.
As a fintech company, we enable payments by providing connectivity to almost 95% of Ukrainian acquirers and payment providers simply with one integration and vice versa. Our strategy is also bi-directional in that we can help UK businesses access consumers or customers here. The same way we're helping Ukrainian and neighboring countries businesses to access foreign markets including the UK, which is the world's fintech capital. We're already working in the UK market.
Andrew: Aleksandr is the CEO of an engineering company and a construction company, so how do you see that from your perspective?
Aleksandr Nikitin: I see a big opportunity for us as engineers and also in combination with tech companies. When talking about the industrial strategy of the UK and digitally built Britain, in the UK you have quite big challenges to digitize the construction and building sectors. If we are talking about digital construction, it's very difficult to say what is still engineering and what is IT. It's becoming more and more IT. We are combining this effort. We can contribute to the industrial strategy of the UK with help of our talented people. You need a lot of digital driven people in order to make this transformation happen. In respect to bi-directional benefits, we are also looking for investors from the UK and developers who will invest in Ukraine and we can be supported by the professional engineers in Ukraine. This is definitely a win-win approach for us in the future.
Andrew: Kerry mentioned that Ukraine is still not visible enough in the United Kingdom. Are there more opportunities now compared to before? And what kind of obstacles were out there before that are gone now from your perspective?
Pete: There are no obstacles with Brexit being finished. We've been doing business in the UK for some time. The only obstacle that could happen is just the old time zone difference of a couple of hours. But we don't really see any problems that can’t be resolved remotely.
Andrew: Okay and how about this image issue? Few years ago I spoke to the CEO of HSBC in Poland which is a huge market nearby. He said that people in the UK have an image of Poland from between five and 20 years ago. We're talking about Poland which is an EU country, and Ukraine is still not an EU country. Alexandra mentioned those issues like corruption and so on, which are changing of course. But do you think that people in the UK should be or have to be exposed more to what Ukraine can offer and if so, how should that be done?
Alexandra: Of course it's important to change the situation inside the country but it is also important to broadcast our changes to other countries and to the UK as well. We’re going through a lot of changes and there’s a lot of interest in new initiatives in our country. First off, a new Ministry of Digital Transformation, Export Promotion Office which helps us in this mission as well. It's also important to support such initiatives as Ukrainian trade missions, Ukrainian pavilions at different exhibitions and conferences, and so on.
We have to be bold and brave to speak about our changes and opportunities that we offer to the world. It's important to be seen as a country with a good reputation. The work inside the country is important, but we must not forget about the PR of our country, and to build a new image of it. I’m personally involved in different initiatives which help build this image. I was organizing the London Tech Week, Ukrainian event together with the embassy of Ukraine to the UK and with an Export Promotion Office and Kyiv IT Cluster. I was one of the organizers for Ukrainian pavilions in Israel and at the Web Summit.
We should take it step by step, like baby steps probably. I hope that this will help us to bring more clients to our country, more partnerships, investments, and new good connections.
Den: Ukraine is an extremely big country, and with a population of more than 40 million people we have a very dense concentration of talents. We are able to build a lot of tech products and are already on the way to competing with global players in terms of software services. We have a very good opportunity to work with British companies since there are no serious obstacles in the tech industry. Maybe there are some slight nuances in culture.
Alexandra: We are ready to cooperate. Tech sphere in Ukraine started in the early 90s. So, at the moment we are quite mature, we understand all the processes, we now integrate the compliance into our companies bringing them from Europe, from US companies, and from our clients. That's why working with us is easy. We understand business processes and we help businesses solve their tasks with technology solutions.
Kerry: I just wanted to jump in here because this is my recent personal experience with Ukraine. I’m a major fan, I think there are no obstacles and you have lots of opportunities. I’ve visited Ukraine several times and been impressed by everybody. We invited Ukraine to join the global technology and business services council because we wanted to be inclusive with Ukraine. And Ukrainians accepted that invitation. But then they've done nothing with it. They've attended none of the events, they've marketed none of the meetings.
We've run a couple of brilliant events that look at the future of the industry, and Ukraine has not participated at all in any of those conversations. I think it's a missed opportunity and I’d like to call them out and see if anybody wants to bring Ukraine back in.
But, in addition I just wanted to make a couple of points. You don't want to sell on being cheap, you want to sell on quality. That's a key message for Ukraine, so do stick with that. And then my other observation is that you've got to promote the brand of Ukraine.
Maria: As an IT law firm we are dealing with companies that want to become compliant with different European and the UK regulations. From my point of view, over the last two years the number of such Ukrainian companies is increasing. That means that we are not just entering this market, we are entering it with all of the compliance solutions.
Taras: I just want to reiterate that there are no more legal problems whatsoever. We are on a level playing field with other competitors. Now it depends on us how we use this and benefit from that.
Andrew: What other aspects make companies from Ukraine more competent and competitive than other players in the market?
Arthur Korniyenko: Quality. Our internal market is very competitive, so a lot of companies provide really good quality.
Alexandra: We have good examples of product companies, like Grammarly, Petcube, and MacPaw. They are world known product companies. And if we’re talking about service companies, we’re not just IT outsourcing or consulting companies. We’re providing more value to our customers by helping them to connect to partners, to find investors, to find clients for our customers, and to help them solve their problems. For example, Sigma Software provides business analysts who can dig deeper into the project of the client. The industry as well as our expertise is growing, and it's important to know that IT services is not just IT outsourcing anymore.
Alex: Alexandra named a few top-notch worldwide companies, and it's important to learn why those companies trust their people which are based in Ukraine. I believe the answer is that they are all well-educated and intelligent people because of their good quality education. This is probably one of the best things that we received in legacy from the Soviet Union.
Andrew: Ok, what are some final words for companies to summarize and to pitch their offer to UK tech companies and also IT services buyers.
Alex: AltexSoft is a data engineering and analytics company. We build everything starting with data infrastructure, data collection and help to manage this data in the right way. We also do business intelligence, predictive and prescriptive analytics. We enable intelligent automation of related tasks, and we help our clients to cut operation costs. We're also capable of building AI products on top of that which solve really complex problems of personalization, decision support, or sentiment analysis. Data is the new oil and we help our customers to work with their data.
Pete: Innovecs is an established company. I’m based in the UK, so we already have a footing here. The reason to use us is we already have a very strong track record. People have already mentioned quality from Ukraine, that's what British people believe in. They believe in quality, and they believe that Ukraine has quality. The third thing is that we actually do deliver, and we deliver on time. And that's the big thing. We can give quality and we deliver on time. Price is never an issue, it's a matter of delivering a project, doing what we say we're going to do, and doing it really professionally as well. That's the key initiative for us as a company, and also for Ukraine as a country as well.
Alexandra: Come to Ukraine as soon as the borders are open and we'll be happy to help your enterprise become digital. If you are a startup, we’ll be happy to help you grow faster in a more efficient way. Sigma Software is always your reliable tech partner.
Arthur: Don't be afraid of working with Ukraine. Just try it, and you’ll realize that the quality is really good and you can rely on our companies.
Den: As a tech company that helps online businesses with payment technologies to access other markets, we welcome UK businesses to Ukraine. And I hope to see more Ukrainian businesses in the UK.
Aleksandr: We are quite innovative engineers in the construction industry. We create information models of physical assets and help with the digital transformation of buildings and industrial projects. So you are very welcome in Ukraine.
Andrew: You definitely want to work with Maria, she can certainly walk you through legal issues. Maria?
Maria: Absolutely! I’m also sure that any UK company that starts to work with any of the participants of our trade mission will get added value from this corporation. Our company will provide legal services on first of all, data protection compliance, personal data production compliance, and we help companies run their online activities compliant with the requirements of markets that they are targeting. We always find a balance between the operational needs of business and legal requirements.
Andrew: Taras, any final thoughts? You deal with British entrepreneurs on a regular basis.
Taras: I would like to come back to the strategic partnership agreement. I truly believe that this is another convincing argument to strengthen cooperation not only in IT, but in all other sectors and spheres as well. The more we trade, the more we cooperate in user sectors. It directly impacts computer services as well. We already see a huge increase in growth in our exports,and our account has grown 25% for the last five years. So just remember that the agreement is a two-way road. Ukraine is open for UK investments and exports as well, and we are really happy to work with UK business.
Andrew: Fantastic, and the very final word from Kerry.
Kerry: The new opportunities are huge. The work that I’ve seen delivered by Ukrainian companies has been incredibly positive. As of today, a number of Ukrainian companies have won awards for the work they've done for UK companies. We've got something called the GSA partner platform and I know there are a number of Ukrainian companies that rank really highly in there. We've got some fantastic Ukrainian companies that are performing incredibly well on the platform.
So, keep up the good work and the opportunities are significant for Ukraine to do more and more business with the UK.
Andrew: Perfect. And my final message to all British entrepreneurs who don't yet use services or do not work yet with Ukrainian companies: If you haven't been to Ukraine, definitely visit when it's possible, and I am quite sure that you will be convinced that you should work with Ukrainian companies as well.
Welcome to the post-Brexit future, a new chapter and new business opportunities for the UK and Ukraine!