This site uses cookies to provide a better experience. Continuing navigation accept the use of cookies by us OK

Economic bilateral relations


Economic bilateral relations


The UK’s economy (the fifth-largest in the world and the second-largest in Europe) is led by the service sector, which accounts for almost 80% of the UK’s GDP. Industry accounts for approximately 20%, while agriculture plays only a minor role.

The UK’s attractiveness as a destination for financial and commercial activities and foreign investment can be attributed to a significant economic recovery in the last few years (with a GDP growth of 2.2% in 2015 and 2% in 2016) and to the numerous business opportunities available. This is thanks to a number of factors, not least the fact that London is a major global financial hub, attracting a large number of entrepreneurs seeking investments. The UK also offers an attractive business environment characterised by ease of setting up a company, minimum barriers to entry and a transparent set of taxes, laws, regulations and public incentives, which favour business, research and technological innovation, as well as an efficient public sector.

The recent changes following the 23 June referendum when the British population voted in favour of leaving the European Union, and the subsequent expectation of a “hard Brexit”, has brought in a climate of uncertainty on the future growth path of the country. (For the first time since 2009 the Bank of England lowered interest rates by one quarter of a percentage point as a stimulus measure, bringing them down to 0.25%.) There is also uncertainty around the future nature of bilateral trade relations, which will become clear only at the end of the Brexit negotiations.

The Brexit negotiations began on 29 March 2017. Article 50 of the Lisbon Treaty sets a two-year deadline for completion, extendable only with the unanimous agreement of all EU member states. Until the negotiations are over, the legal status quo will be preserved and EU legislation, including freedom of movement for goods, services, capital and people, will continue to be applicable in the UK.

Sterling’s fall in value against other major currencies following the referendum (it fell 15% against the euro) leads to a reasonable expectation, at least in the short term, that British exports and foreign investment will increase. An example of this trend is the Japanese firm Softbank’s post-referendum acquisition of British chip designer ARM, which is likely to have been accelerated by the favourable exchange rate. The takeover was hailed by the British government as reassurance that predictions that Brexit would lead to capital flight from the UK were exaggerated.

In terms of trade flows, in 2016 Italy was seventh on the ranking of the top countries from which the UK imports and the eighth on the list of countries to which it exports. The UK, meanwhile, was eighth on this list of countries from which Italy imports and fourth among the countries to which it exports. There has been a marked increase in Italian exports to the UK in recent years, reinforcing Italy’s trade surplus.

Italian exports to the UK in 2016 grew by +0.5% year-on-year, continuing the trend that began in 2012 (+8.1% year-on-year growth in 2012, +3.4% in 2013, +6.8% in 2014 and +6.9% in 2015). Italian exports to the UK were worth €22.6bn in 2016.

The UK’s exports to Italy have followed a similar pattern, with a 6.3% year-on-year increase in 2014, a 5.8% increase in 2015 and a 1% increase in 2016.

Italy’s top exports to the UK are mechanical goods, followed by automotive products, textiles and clothing, food products and chemicals. The UK’s top exports to Italy, meanwhile, are automotive products, pharmaceuticals, machinery and chemicals.

According to a study by the insurance and financial company SACE, due to the Brexit referendum the rate of growth of Italy’s exports to the UK in 2016 was 1-2% (€200-500m) lower than forecast in the 2016 Export Report, although this difference is almost negligible, equivalent to just 0.1% of Italy’s total exports. This fall in the rate of growth of exports is due to the fact that the UK’s withdrawal from the EU requires new agreements to be drawn up regulating relations between the two parties.

The sectors that experienced the greatest slowdown in 2016 were mechanical goods (with growth €100-200m lower than predicted) and transport. However, a number of important sectors, such as textiles and clothing, and food and drink, were not adversely affected.

In 2017 there has been a more marked slowdown in Italian exports to the UK – as was expected, given the macroeconomic scenario. SACE forecasts a contraction of 3-7% (€600-1,700m), equivalent to no more than 0.4% of Italy’s total exports. Once again it is the sectors of mechanical goods and automotive products that are most affected, with a possibility that these sectors may shrink by over 10%. Italian exports of food products to the UK, however, continue to grow.

Italy is near the top of the ranking of European countries investing in the UK. The top sectors in which Italy invests in the UK are energy renewables, defence, precision engineering (automobile and aerospace), and the creative and digital industries, alongside the more traditional sectors such as fashion, design, banking and finance, mechanical engineering and pharmaceuticals.

Energy is the leading sector in terms of sales volume, largely due to the provider ENI and its affiliates. The second biggest sector is defence, thanks to the Leonardo-Finmeccanica group, whose operations in the UK focus mainly on helicopters, military defence systems, data and information protection, aerospace systems and electric engineering for land and naval defence (AgustaWestland and Selex ES).

The third largest sector is the automotive industry, primarily thanks to the Fiat- Chrysler Group.

The most important groups in the appliances sector are Merloni (branded Indesit), Candy (Hoover) and De Longhi (Kenwood).

In the sector of electric and electronic components, Telemar UK is one of the leading companies.

Other Italian companies worth mentioning include Prysmian, Tratos, Seda Packaging Group, Bifrangi, Zambon (which has recently acquired the British company Profile Pharma), Assicurazioni Generali, TerniEnergia, Green Network, Inconsulting, Reflex&Allen, Mapei, Digital Bros, Kinexia, Laminazione Sottile and PFE. Investindustrial, an Italian investment fund, also invested in Aston Martin.

A number of prestigious fashion and design brands have also opened showrooms and retail outlets in the UK market, especially in London. These include Armani, Versace, Prada, Loro Piana, Brunello Cucinelli, Dolce & Gabbana, Max Mara, Zegna, Bulgari, Ermenegildo Zegna, Tod's, Furla, Sergio Rossi, Natuzzi, Scavolini, Alessi, Guzzini, Moleskine, Piquadro and the brands within the OTB group (Diesel, Maison Margiela), the Calzedonia group (Calzedonia, Intimissimi, Tezenis, Falconieri) and the Vicini group (Vicini, Giuseppe Zanotti Design).

Italian groups have made a number of major mergers and acquisitions of British companies in recent years, including merger between Yoox and Net-à-Porter, which gave rise to the Yoox Net-à-Porter Group, an independent global leader in luxury fashion and e-commerce. This merger was testament to the strategic nature and opportunities of the luxury and fashion sectors for Italy. Another important acquisition was Trenitalia’s takeover of NXET, the manager of the City to Coast (C2C) rail service connecting London and Shoeburyness in South Essex.

The financial sector is also pivotal to the bilateral economic relations between the two countries, especially in view of the fact that the City of London is one of the most important financial hubs in the world and is used as a base for European investment by many Asian and North American investors. A number of Italian banks have branches in the City; these include Unicredit, Intesa-SanPaolo (which has recently opened a branch specialising in private banking), Mediobanca, Monte dei Paschi di Siena and Banca IMI. These banks and the merger between the London Stock Exchange and Borsa Italiana are a crucial element of bilateral economic cooperation. The City is also home to numerous Italian private equity funds and family office funds.

To publicise the innovation and achievements of Italian companies, the Embassy of Italy in London recently ran the Italian Imaginative Innovators (Triple I) initiative, a series of conversations between Italian business leaders and prestigious British journalists (see dedicated pages on this site).

For further information:

Data on bilateral trade
• Data on bilateral investments (flows e stock)
Macro-economic conditions in the UK (in Italian only)
Italian Companies in the UK

Agreements on tax issues

• Agreement between the Italian Republic and the Government of the Cayman Islands on the Exchange of Information on Tax Matters, signed in London on 3rd December 2012 (entered into force on 13th August 2015)
• Agreement between the Government of Italy and the Government of Jersey on the Exchange of Information relating to Tax Matters, signed in London on 13th March 2012 (entered into force on 26th January 2015)
• Convention between the United Kingdom and Northern Ireland and the Italian Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to Taxes on Income, signed on 21 October 1988 (entered into force on 30 December 1990)

International economic organisations based in London

o The European Bank for Reconstruction and Development (EBRD) 
o The International Coffee Organization (ICO)
o The International Grains Council (IGC) 
o The International Sugar Organization (ISO)