Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Warsaw 2019 This report was prepared on the occasion of the 100th anniversary of the resumption of diplomatic relations between Poland and the United Kingdom.
It was produced as part of the Business is Great campaign.
Prepared by: Deloitte Advisory sp. z o.o. sp.k. (formerly: Deloitte sp. z o.o.) Report partners: Embassy of the United Kingdom of Great Britain and Northern Ireland in Warsaw, British-Polish Chamber of Commerce. Entities responsible for providing part of the source data and information for the overview of best practices: Arriva, the Aviva Group, BP, Diageo, GlaxoSmithKline, the LUX MED Group, Provident, Sage, the Sue Ryder Foundation, Tesco. This report was prepared: May-August 2019 Contents
Introduction 4
Summary 8 Key facts and figures 10 Polish-British cooperation over the past 30 years 12 British investment and its importance for the Polish economy 34 Sustainable development – best practice and the most promising areas of partnership 56 Conclusions 82 Annex – underlaying methodology 83 List of figures 84 List of tables 85 Endnotes 86 References 87 Introduction
Foreword – HMA Jonathan Knott British Ambassador to Poland
This year marks the centenary of the resumed diplomatic relations between Poland and the United Kingdom. It is thus an excellent occasion to recall important moments our nations have shared, the challenges we have faced together and the support we have given each other, while appreciating the depth and breadth of our current relationship.
Our governments are now holding their One element of our shared history boosting Poland’s development. Not annual consultations. Our militaries which has perhaps not received as just in taxes paid or in products and have a shared defence agreement and much attention as it deserves is our services offered, but in contributing are working together as closely as never trading partnership. Its origins date in a much broader sense to the before, with 150 British troops currently back to the Middle Ages, when Polish development of Poland as a whole stationed in Poland. Our business and grain was shipped to Great Britain, while and its local communities. These are scientific communities are brought British crafts travelled in the opposite enduring and positive relationships, together every year at the Business, direction. But over the past century, and benefiting all parties involved and set to Trade and Investment Forum and at the in particular in the years since Poland continue into the long term, in the spirit Science Forum, while representatives threw off communist rule, our mutual of partnership and respect. of the Polish community in the UK trade has blossomed and flourished, and the British community in Poland growing swiftly and supporting the The ties between Poland and the United meet at the Belvedere Forum to share development of both our countries. Kingdom are set to grow stronger issues and solutions, reinforcing vital in the years to come, their stability people-to-people ties. Our two nations Through this publication, we aim to and durability now and in the future are enjoying an exceptionally close shine a light on the role which our trade underpinned by Polish and British relationship. relations, in particular UK companies business. investing in Poland, have played in
4 Foreword – Antoni F. Reczek, OBE Chairman of the British Polish Chamber of Commerce
The British Polish Chamber of Commerce (BPCC) has been active in Poland since 1992. Our member companies (currently 300) are present across most sectors of the Polish economy: manufacturing, retail, financial services and health care, as well as B2B: consulting, legal services, real property and HR.
Since its inception, the BPCC’s mission of superior and much more effective has been to network business organisational cultures brought in by relationships between Polish and UK foreign-owned companies. As for British companies, support UK investors and employers in Poland, productivity and integrate them into the Polish market, innovation are their key distinguishing which, as demonstrated in this report, is features, resulting in much higher of huge importance to both economies. earnings, as well as average taxes and social security contributions, per Investor relations and the business employee. The popularity of British environment are key to the BPCC. professional standards, transposed We are pleased that Poland is well to function perfectly on the Polish perceived by prospective investors on market, has been a huge success, account of the size of its economy and with organisations such as the ACCA, its growing integration with the global CIPS and RICS having attracted tens economy and EU market, as well as the of thousands of Polish members, availability of local suppliers of goods becoming bywords for quality and and services. However, there are also prestige. The raising of qualifications barriers, with the tax wedge, decreasing and standards has been a key factor availability of skilled workforce and influencing Poland’s economy, especially unpredictable legislation among those by setting benchmarks in ethics and typically pointed to by UK investors. transparency. On behalf of our members, we have long recommended that the regulatory I am particularly happy with the fact that environment should be made more British companies have plans to further transparent and provide a level playing expand their footholds on the Polish field to all business entities. market: statistically, three out of any four of them want to increase staffing The vast majority of economic analyses and investment levels. Therefore, it is prove a positive impact of foreign with pride and optimism that I see the capital on the host country’s economic future of British business in Poland, development, which is a combined encouraging you to read this report and effect of investments in fixed assets take part in the BPCC’s activities. and technology transfers, but also
5 Foreword – Irena Pichola Partner, Leader of the Team for Sustainable Development in Poland and Central Europe at Deloitte Poland
The economic relations between Poland and the United Kingdom have been developing at an exceptionally vigorous pace. In addition to their obvious economic benefits, they are also stimulated by global challenges such as climate change and air pollution.
British companies operating in and natural environment. The HR challenges do not necessarily mean that Poland are actively committed to the Trends survey conducted this year in similar solutions would be optimal in the Sustainable Development Goals, while Poland by Deloitte has revealed a rise in UK and Poland, but if Poland could even the UK public administration is ready to optimism. 32% of HR leaders, but also partially draw on the British experience, share its knowledge and best practice IT leaders and executive staff, believe in line with the evidence-based policy in public policies. What renders this that aspects related to corporate concept, it would certainly increase its partnership exceptional are its well- responsibility and impact have moved chance of success. Moreover, certain established foundations, translating up their list of priorities compared challenges of the contemporary world, into economic benefits, as well as a set with a year earlier; with 42% of all such as energy transformation, water of shared values, with sustainable respondents expecting them to gain management, a circular economy and development featuring prominently on further in importance over the next the public sector’s digital transition, are the two countries’ agendas. three years. also a source of business and economic opportunities, which may become The growing trade flows, the ever more Also Polish government institutions an excellent driving force for mutual visible presence of UK companies can, and perhaps even should, seek relations between Poland and the on the Polish market and their close inspiration in the British experience. United Kingdom. links with Polish business provide an Over a relatively short time, the UK has opportunity to disseminate in Poland at fundamentally transformed its economy Inviting you to read on, I am confident least some of the British best practice towards low emission technologies that the best practices described in in sustainable development. What and efficient use of natural resources. this report will shed some light on the I primarily have in mind is the business A number of comparisons can be drawn British understanding of corporate sector’s support of systemic changes, here with Poland, which has also made responsibility and management of which, cumulated on a countrywide significant headway, but still needs to corporate impacts. scale, can really bring about a change accelerate change in some fields, such for the better in the social, economic as decarbonisation. Admittedly, similar
6 One hundred years of Polish-British friendship*
‘We hope that after the war Great During the war, the BBC’s Polish section Britain will remain united to Poland provided their compatriots suffering in bonds of close friendship,’ said under the Nazi occupation with Andrew Bonar Law in 1917. The important news of the war, offering words of the then Chancellor of the them hope of survival and victory. Exchequer turned out to be prophetic. For many Poles, the BBC was the only In the 20th century the United Kingdom contact with the outside world, and and Poland forged an exceptional listening to the broadcast from London and strong relationship, marked by became the very symbol of resistance. solidarity and cooperation and by mutual commitment to prosperity During the difficult post-war period, and democracy. As the independent Great Britain remained an advocate of Polish state was reborn in 1918, it independent Polish statehood. During immediately established diplomatic her visit to Poland in 1988, Margaret relations with the United Kingdom. Thatcher emphasized the British The young Polish Republic was soon commitment to restoring democracy confronted by a crisis during the Soviet in Poland. In her famous speech she invasion of 1920, but prevailed. London argued: “People have to be involved in exulted at the news of its victory. Edgar decisions about the way forward. They Vincent D’Abernon, a diplomat, went must be free to choose.” as far as asserting that ‘Had Pilsudski failed to arrest the advance of the The victory of the Solidarity movement Soviet Bolshevik Army at the Battle of and the collapse of the Iron Curtain Warsaw... the very existence of Western allowed for political transition in Poland. civilisation would have been imperilled’. The foreign policy of Great Britain by that time had also changed. Its goal was The relations between Poland and now to support Poland in the transition the UK deepened during the Second from a communist to democratic and World War, as Poles fought alongside free-market society. With this aim, the their British allies for the liberation of United Kingdom created the “Know Europe and freedom of Poland. The How” fund, which, thanks to expert Polish government-in-exile was based advice and financial assistance, has in London. The war witnessed countless helped the Polish economy renew acts of heroism by Poles, also those cooperation with the West. wearing British uniforms. Polish pilots of the famous No. 303 and No. 302 RAF After the political transformation, Squadrons helped defend the British Poland’s next step was accession to Isles against the German invasion NATO and the European Union. Great during the Battle of Britain, Polish Britain played a key role in this, winning soldiers fought in North Africa and the support of more skeptical Member Norway, and took part in D-Day landings States. In March 1999, Poland joined in France, while Polish sailors made NATO and in May 2004 became a full significant contributions to winning the member of the EU. Since then, Polish- war at sea, including the sinking of the British relations have grown in strength, German battleship Bismarck. Before the both between the national governments outbreak of the war, Polish cryptologists and the people. The United Kingdom is played a key part in breaking the Enigma now called home by almost one milion code, sharing the results of their work Poles, and over 30 British and Polish with British allies. cities have partnership agreements.
*Excerpt prepared by the Embassy of the United Kingdom of Great Britain and Northern Ireland in Warsaw. 7 Summary
Background of this report and through the financial markets, Republic).1 Over the same period, The centenary of renewed relations including direct trade flows. Apart from imports from the UK went up from between Poland and the United economic benefits, a vital driver of our USD 1.5bn to USD 6.5bn.2 Kingdom is an excellent moment to look partnership is a set of shared values back and review their current status, and ideals, including a competitive The most spectacular rises were seen while reflecting on their prospects for market economy, democracy, human in the food industry (from USD 143m the coming years and decades. The rights and sustainable development. in 1995 to USD 3.21bn in 2017) and occasion is all the more suitable as the machine building (from USD 56m anniversary comes amidst some crucial Methodologies and data in 1995 to USD 2.54bn in 2017). political and economic processes, which sources Poland’s imports from the UK include are bound to affect future cooperation This report is the first publication mainly chemical products (USD 1.67bn, between the two countries. On the one on the Polish market to exhaustively accounting for about 25% of all hand we have the stalling globalisation address the importance of economic imports), and machinery (USD 1.22bn, process, especially when it comes to the relations between Poland and the about 19% of the entire volume of liberalisation of international trade and United Kingdom, also in the context of imports). The United Kingdom ranks free movement of capital; and on the sustainable development. It is based even higher (holding number two other we face environmental challenges on five underlying methodologies and position) as Poland’s trading partner on a global scale. Technological data sources (econometric analysis, in services. Every tenth transaction progress is yet another factor behind macroeconomic analysis, statistics, between Poland and the world involving international relations, creating space surveys, and case study findings), which services is with the United Kingdom. for the development of new markets, have helped paint a unique picture of innovative goods and services that mutual ties between the two countries. The unique quality of these relations could respond to the global challenges is also evidenced by the fact that the in the social and environmental Exceptional relations - Key actual volume of Poland’s trade with the spheres. facts and findings United Kingdom is significantly above The most compelling evidence that the that estimated by an econometric Despite the changing international bilateral economic relations are thriving model for 185 countries, taking into landscape, the relations between is a strong rise in trade. Adjusted for account the size of and the distance Poland and the United Kingdom can inflation, trade by value increased between their respective economies. be described as an exceptional and over fivefold between 1995 and 2018. The actual trade volume (over USD 20bn enduring partnership. Both countries Exports of goods from Poland to in exports and imports for 20183) have greatly benefited from the the UK rose from USD 930m in 1995 exceeds the amount predicted by liberalised trade in goods and services to USD 16.6bn in 2018, making the the model by more than 30% (just and free movement of capital, both in latter Poland’s third largest export over USD 15bn). Reasons behind the the form of foreign direct investment market (after Germany and the Czech exceptionally high trade volumes
8 Summary
relative to the countries’ GDPs include growth of Poland’s shared services Sustainable development – best their strong competitive advantages sector (having established 11% of all practice and promising areas of over European rivals as well as foreign SSC and BPO centres in Poland, partnership widespread migration of Poles to the employing over 25,000 people). Over the last dozen or so years, the British Isles. British companies with a presence concept of sustainable development in Poland have also helped bring (formulated into the 17 Sustainable The migration processes have given about a number of positive economic Development Goals – SDGs) has a boost to trade, but have also developments. Firstly, they have helped increasingly come to the forefront of strengthened ties between the two improve productivity by transferring attention. Tackling the challenges faced countries across all other dimensions. their know-how and organisational by Poland in energy transformation, The United Kingdom was one of only cultures, with effects spilling over to adaptation of the water management three countries that opened their local contractors and competitors. system to changing climate, a closed- labour markets to Polish workers as Other benefits have been in increased loop or circular economy and the public soon as Poland joined the European access to innovation (as UK-based sector’s digital transition, and meeting Union in 2004. As a consequence, companies spend about 3.6% of the related SDGs, will not be possible almost 800,000 Poles now hold their value added on research without active partnerships between temporary residence permits to stay and development, compared with the public and private sectors. in the UK.4 Higher employment rates, barely 1.5% in the case of Polish firms), including among Polish migrants, have as well as the Polish economy’s moving For many years now, UK-owned been driving the UK’s GDP, while money up global value chains, partly through companies have maintained remitted back to Poland has stimulated their UK-based business partners a commitment to making sustainable consumption – according to the NBP enjoying access to leading global development a reality in Poland. Their data for 2016, 34.2% of Polish migrants markets. operations, investments and extra remitted home a portion of their efforts have had a positive impact on earnings. As UK investors are planning to further the local economy, propelling GDP expand their footholds in Poland, their growth, while also improving the living British investment and its impact on the economy and society standards in Poland. UK firms are importance for the Polish economy is bound to grow in parallel. A survey especially active in the pursuit of the Foreign direct investment (FDI) has conducted among selected British firms following SDGs: good health and well- been a main engine of Poland’s operating in Poland has found that 63% being (SDG 3), quality education (SDG 4), economic growth after 1989. of respondents want to increase sustainable cities and communities Companies from the UK have been the headcounts over the next five years, (SDG 11), responsible consumption and fifth largest group of foreign investors, and 73% are set to raise investment production (SDG 12) and partnerships their direct investment in Poland having spending. According to those surveyed, for the goals (SDG 17). reached PLN 48.1bn.5 As a result, key factors supporting their business Polish GDP in 2017 is estimated to have expansion plans include Poland’s It is important to note that the been higher by as much as PLN 15bn integration with the EU and favourable challenges related to SDGs are at once compared with a scenario in which no economic climate (selected by 82% enormous business opportunities that such investment had been made. and 73% of respondents, respectively). can drive forward the relations between The biggest barriers cited by them Poland and the United Kingdom. There are approximately 400 UK-based include unpredictable legislation (82%) The most promising areas of such non-financial sector companies and the labour tax wedge (73%). potential cooperation include energy operating in Poland, employing transformation, especially in offshore over 110,000 people – mainly in wind power, where Poland’s potential manufacturing (127 companies, capacity is estimated at 10.3 GW. The 38,000 employees) and retail UK’s transformation towards zero- and (69 companies, 43,700 employees). In low-emission electricity sources is addition, UK-based financial services now well under way, with zero-carbon companies present in Poland employ electricity generation having in the first over 4,000 people, bringing the total half of 2019 surpassed that from fossil to approximately 115,000. In recent fuels. This is just one of many areas in years, UK-owned companies have made which the two countries could benefit a major contribution to the strong from exchange of experience.
9 Key facts and figures
PLN 48.1bn 30% higher PLN 48.1bn is the value of the UK’s direct The actual volume of trade with the UK in 2018 is 30% higher investment made in Poland by the end of 2017. than that projected by an econometric model forecast covering 185 countries in the period 1995-2018. Trade flows between Poland and the UK rose in 1995-2018 by more than 500%, testifying to the exceptional nature of their mutual economic relations.
PLN 15bn But for direct investment from the UK, Poland’s GDP in 2017 would have been about PLN 15bn lower. This effect is attributable to the inflow of knowledge, technologies and capital. 905,000 Poles The number of Poles residing in the UK in 2018 was 905,000, outnumbering any other nationality6.
115,000 British companies operating in Poland have a total headcount of nearly 115,000. 18% of significant increase 63% of leading British companies operating in Poland expect to increase their staffing levels (of which 18% expect to increase them significantly) over the next five years compared with the five years before.
Third place The UK ranks third among Poland’s largest trading partners. 9% of significant increase 73% of leading British companies operating in Poland expect to increase their investments outlays (of which 9% expect to increase them significantly) over the next five years compared with the five years before.
10 Key facts and figures
Third place Strategic actions The UK is also an important partner for Poland in the For many years, British companies operating in Poland trade of services, ranking third, after Germany and have taken strategic actions to enhance their positive Switzerland, among countries to which services are social impacts and minimise their adverse impacts on the supplied from Poland (with a 7.3% share) and second environment, in line with Poland’s development objectives among service suppliers to Poland (with an 8.4% share). and the international 2030 Agenda, thus significantly contributing to the delivery of Sustainable Development Goals.
Supporting factors Poland’s integration with the EU (indicated by 82% of those surveyed) and prevailing economic climate (selected by 73%) Main goals are the key factors supporting the development of business The main goals advanced by these organisations include in Poland according to the British companies covered by the good health and well-being (SDG 3), quality education (SDG 4), survey. sustainable cities and communities (SDG 11), responsible consumption and production (SDG 12) and partnerships for the goals (SDG 17).
Hindering factors On the other hand, the unpredictable lawmaking (82% of responses) and the tax wedge (73%) were the factors most frequently identified by them as hindering business.
11 Polish-British cooperation over the past 30 years
Introduction
Despite their geographical distance, Since 1991, Poland has been gradually Poland has historically strong narrowing the gap with the UK in connections with the United terms of GDP per capita levels. Kingdom. The developments of the Poland’s accession to the European past three decades, including Poland’s Union fast-tracked the process, political transformation and accession which advanced at its fastest pace to the European Union, have further in 2006–2010. As the economic tightened these ties. Poles have disparity between the two countries become the UK’s largest national has been shrinking, a shift has also minority, while British companies, been under way in the structure of which in the 1990s were helping build their trade, with Poland exporting and Poland’s private sector, are currently importing increasingly more advanced supporting the development of key goods and services. branches and innovative potential of the Polish economy.
12 Polish-British cooperation over the past 30 years
Infographic 1. Comparison of UK and Polish economies
37.96m USD 231.6bn Population (2018) Exports of goods total (2018)
USD 1,105.9bn GDP by parity purchasing power (2018)
USD 16.6bn USD 6.5bn Polish exports UK exports to the UK (2018) to Poland (2018)
66.27m USD 442bn Population (2018) Exports of goods total (2018)
USD 2,856.7bn GDP by parity purchasing power (2018)
Source: Deloitte based on IMF and Eurostat data
13 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 1. Poland’s GDP per capita in relation to Great Britain’s GDP per capita (UK’s GDP per capita = 100%)
70
65
60
55
50
45
40
35
30 2011 2015 2012 2017 2013 2016 2018 2014 1992 1997 2010 1991 1993 1995 1998 1996 1999 1990 1994 2002 2007 2001 2003 2005 2008 2009 2006 2000 2004
Source: Deloitte based on IMF data
Political and economic relations between Poland and the United Kingdom
Poland’s economic and political The past 30 years have witnessed Another landmark in the political and ties with the United Kingdom go mutual relations between Poland economic history of Poland, which back many years through history, and the United Kingdom develop at set the course of its relations with in some respects ranking second a vigorous pace. Leaving aside the the UK for the next 15 years, was the in importance only to its ties with historical context, their development former’s accession to the European Germany. A watershed moment came over that time has largely been driven Union in 2004. It triggered a surge with the political changes embarked by events taking place in Poland. in UK-bound migration from Poland, on by Poland after 1989, followed by Poland’s political transformation having by now made Poles the largest its accession to the European Union after 1989 allowed it to forge closer national minority living on the British in 2004, which provided a further economic and political ties with other Isles. The scale of migration and travel boost to trade flows between the two countries, turning it into a reliable between Poland and the UK is reflected countries. A little later, the opening of partner for Western governments and by the number of passengers served at the UK’s labour market to workers from businesses. This resulted in Poland’s Polish airports – in 2018, almost 22% new member states of the enlarged joining the Organisation for Economic of them (7.8 million) were booked on European Union, including Poland, drew Cooperation and Development (OECD) flights heading to Great Britain7. an influx of Polish job seekers. in 1996 and then NATO in 1999.
14 Polish-British cooperation over the past 30 years
Table 1. Non-British population in the United Kingdom by nationality
Nationality thousands
1 Poland 905
2 Romania 415
3 India 355
4 Republic of Ireland 331
5 Italy 300
Source: Deloitte based on Office for National Statistics (ONS) data
On the other hand, an inflow of proportion of foreign businesses foreign capital, including investments active in Poland, playing a major role in made by British companies, has been stimulating Poland’s economic growth. a crucial driver of Poland’s economic Over the past 30 years, foreign capital growth for the past three decades. has been attracted to Poland mainly Following the political transition, it was by the availability of skilled workforce an essential source of capital necessary and a labour cost advantage over to fuel the growth of the private Western Europe. What this factor led sector, and then also an important to, among other things, was the rapid transfer path for new technologies and development in Poland of the service know-how. centres (BPO/SSC) sector, including research locations of some large Investors from the British Isles have corporations. come to represent a significant
33 /190 Poland’s strong position as an attractive location for business investment is confirmed by its 33rd place among 190 countries in the World Bank’s Doing Business survey. In the ranking, Poland emerged ahead of the Czech Republic (35th place) and Hungary (53rd place), While the United Kingdom was ranked 9th.8
15 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 2. Investment attractiveness ranking according to a survey by the Both the quality of workforce and Polish-German Chamber of Commerce and Industry – 2019 vs 2018 EU membership are the two highest rated factors making Poland an attractive place to do business in according to this year’s edition 2018 2019 of the survey, carried out among members of foreign chambers of Czech Republic 4.11 4.20 Estonia commerce in Poland.9 What the Poland 3.99 4.16 Czech Republic survey also captures is how much Estonia 3.98 4.05 Poland Poland has gained over the years in the eyes of investors. In 2007, Slovakia 3.98 4.02 Slovakia only 76% of them said they would Slovenia 3.93 3.98 Slovenia invest in Poland again, whereas 24% Latvia 3.74 3.90 Latvia declared otherwise. In the latest edition, the respective proportions Lithuania 3.72 3.82 Lithuania changed to 94.5% and 5.5%. Croatia 3.69 3.73 Croatia Ultimately, in 2019 Poland ranked Romania 3.61 3.51 Hungary third among Central and Eastern Europe’s countries as an attractive Hungary 3.59 3.50 Romania location for business projects. Ranking higher were only Estonia and the Czech Republic, which also Source: Polish-German Chamber of Commerce and Industry (AHK Poland). in other surveys are often indicated as Poland’s natural competitors in terms of the underlying business climate for investors.
Role of foreign trade, direct investment and migration
The strength and durability of destinations – apart from Germany, Before joining the EU in 2004, Poland Poland’s trade ties with the UK are which is naturally our key trading ran significant deficits in its trade attested to by the fact that it was partner (27%) – with a similar share balance with the United Kingdom (with Poland’s third most important export in exports as the neighbouring Czech imports exceeding exports). Conversely, partner as far back as 1929. The levels Republic (6.1%), despite a much greater after 2004 the growth of Polish exports of trade were comparable in 1990, when distance between the two countries. to the UK was not only faster, but also the UK’s share in total exports from Reasons for the UK’s appreciable share steadier than that of imports. Poland amounted to 7.1%.10 Today that in Poland’s trade volumes (especially percentage is broadly similar (at 6.6% in after 2009) are discussed in detail in the first quarter of 201911), placing the Section 1.3. UK stably among Poland’s top export
16 Polish-British cooperation over the past 30 years
Figure 3. Exports from Poland to the UK in 2017 (USD billion)
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Textiles and Agricultural and Stone Products from Metals Chemical furniture food products products mineral materials products products
Vehicles and Machines and others Electronics Other Source: Center for International Development at Harvard University means of transport durable products
Figure 4. Poland’s exports to the United Kingdom Structure of exports in 2017, by product
Meat Tobacco Paper and Other Vehicles Plastics Rubber Soaps, paperboard waxes, paints 1.52% 1.42% 2.47% 2.94% 1.67% 1.24% Vegetables Other Essential Preparations 1.20% 1.07% 3.51% of meat or oils fish Wood 2.57% 2.47% Furniture Cocoa 13.45% 2.94% 2.05% Electrical machinery and Industrial machinery Other 6.28% equipment Precious Articles metals and of iron or 2.04% stones steel 1.84% Toys 1.84%
14.89% 1.81% 12.10%
Textiles and Agricultural and Stone Products from Metals Chemical furniture food products products mineral materials products products
Vehicles and Machines and others Electronics Other Source: Center for International Development at Harvard University means of transport durable products
17 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 4. Imports to Poland from the UK in 2017 (USD billion)
7,0
6,5
6,0
5,5
5,0
4,5
4,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Textiles and Agricultural and Stone Products from Metals Chemical furniture food products products mineral materials products products
Vehicles and Machines and others Electronics Other Source: Center for International Development at Harvard University means of transport durable products
Figure 6. Poland’s imports from the United Kingdom Structure of imports in 2017, by product
Organic chemicals Pharmaceutical Vehicles Apparel, Apparel, products not knit knit 1.48% 1.83% Footwear 6.49% 3.79% Furniture Plastics Dyes, paints, Rubber 1.78% 0.74% inks 0.94% Electrical machinery 1.97% and equipment 13.45% 6.43%
Industrial machinery Apparatures Beverages Cocoa 8.48% (optical, 0.71% Articles Iron medical) 1.63% of iron and or steel steel 2.86% 1.53% 1.13%
Toys
14.46% 1.12%
Textiles and Agricultural and Stone Products from Metals Chemical furniture food products products mineral materials products products
Vehicles and Machines and others Electronics Other Source: Center for International Development at Harvard University means of transport durable products
18 Polish-British cooperation over the past 30 years
Although their relative share has maintained their shares in Poland’s less spectacular as that of exports. remained stable, the volume of exports exports to the UK or saw them In nominal terms, imports grew across to the UK has grown considerably over decline. The former group included all of the above product categories, the past 30 years. In 1990, the value of chemical producers, whose with the exception of minerals, imports goods exported to that country was just contribution since 1995 has remained of which dropped from USD 372m over USD 1bn, while in 2018 it came to around 10%–12% (USD 1.44bn in 2017), in 1995 to less than USD 100m in 2017 USD 16.6bn (at current prices)12. While the latter included sectors such (down from about 25% to 1.4% of as metals (a decrease from almost total imports). The decline reflected Importantly, export volumes grew a third in 1995 to slightly more than 4% a significant reduction in imports of across all key product categories: from in 2017 – USD 577m) and minerals oil and its derivatives (which in 1995 electronics, machinery and vehicles, to (down from 8% to less than 1% in the accounted for a quarter of all imports). chemical products, metals, minerals and same period – USD 132m). Items imported by Poland from the UK stone, to food products and textiles. in 2017 included chemical products The most spectacular increase was The strong growth in exports has (USD 1.67bn, about 25% of all imports), recorded by the food industry, whose been spurred by changes experienced such as heterocyclic compounds exports grew from USD 143m in 1995 by Poland’s economy since 1995. For (4.53%) and medicines (3%), Followed (representing approximately 15% of all one, significant productivity gains by machinery (USD 1.22bn; ca. 19% of Polish exports to the United Kingdom) have been achieved in agriculture and all imports), including office equipment more than twenty times, to USD 3.21bn food processing, leading to a marked (2%) and computers (1%). Interestingly, in 2017 (nearly 25% of all exports). The increase in the quantity (as well as an the shares of both categories main foodstuffs sold to the UK were improvement in the quality) of food – chemical products and machinery poultry (2.06%) and cocoa (2.05%). products. As a country with natural – in Poland’s imports from the United conditions only moderately conducive Kingdom remained broadly unchanged The second sector boasting a significant to food production, the United Kingdom throughout the period under review rise in exports was that of machine has foreseeably become a ready (at 25% and 20%, respectively). manufacturing, with USD 2.54bn worth market for Polish farmers and food of goods sold in 2017 to UK customers, producers. Secondly, substantial Further down the ranking of products accounting for almost a fifth of all Polish foreign investment in the automotive imported to Poland from the UK in 2017 exports to the British Isles. The main sector coupled with the growth of were vehicles and car parts (USD 1bn, export items within this category were local manufacturers of machinery accounting for 14% of all imports), computers (4.5% of total exports), and spare parts have driven a rapid followed by food products (USD 740m) washing machines (1.5%) and computer increase in the exports of electronics and textiles (USD 612m). Within the games (1.5%). (e.g. monitors – 4.3% of total exports) former category Polish importers were and cars (USD 0.8bn; 5.7%). Thirdly, interested mainly in alcoholic beverages Automotive was another industry Poland’s heavy industry has been (with whiskey accounting for 1.4% of whose share in Poland’s exports to restructured with a concomitant the total value of imports) and protein the UK grew strongly in the reviewed decrease in the output of related concentrates (0.3%), while the most period, with almost USD 2bn worth of industries (e.g. steelmaking), resulting commonly imported goods within the goods sold in 2017 to the UK (about 15% in lower production of steel and latter group included footwear (1.8%) of all Polish exports to that country), various other products. Interestingly, and second-hand clothing (0.9%). At representing an almost twofold in 1995 copper and its derivatives the other end of the spectrum were rise (for comparison, it accounted accounted for more than 15% of all metals (USD 320m), whose contribution for only 7%–9% of total exports Polish exports to the United Kingdom, to total imports over two decades has in 1995–2000). Accounting for the vast but that percentage has since shrunk remained stable at around 3%–5%. majority of exports within this category to some 0.05%. Also worth noting Within this category, Poland imports were sales of car parts (6%) and vehicles are exports of silver continuing at mostly steel and iron products (1.5% of themselves (5.7%). Notably, food a significant level (over 3% of the total). all imports in 2017). and automotive production are the key industries of Polish economy, The value of goods imported from making the largest and second largest the United Kingdom to Poland rose contributions to total industrial output from about USD 1.5bn in 1995 to (of 16% and 10.5%, respectively)13. almost USD 6.5bn in 2018 (at current As for other sectors, they either prices), a significant increase albeit
19 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 7. Exports from Poland to the UK
7,2% 16
14 7,0%
12 6,8%
10 6,6%
8 6,4% 6 6,2% 4 6,0% 2
5,8% 0 1990 2010 2017
Value in USD billion Share in %
Source: Deloitte based on Statistics Poland (GUS) data
Balance of trade in services as management and PR consulting The UK is also an important partner services. From Poland’s perspective for Poland in the trade of services, the balance of this trade category was Ranking third, after Germany and positive, with the United Kingdom’s Switzerland, among countries to shares of 19.9% in services supplied which services are supplied from and 21.4% in services purchased15. Poland (with a 7.3% share) and second The highest value among services among service suppliers to Poland14 supplied to the UK was generated (with an 8.4% share). According to by the telecommunications and IT the 2016 data, entities based in the sectors16, which can be attributed to United Kingdom were Poland’s key the prominent role of the BPO and SSC trading partners in the international sector. trade of legal, accounting, as well
20 Polish-British cooperation over the past 30 years
Figure 8. Value of trade in services in 2017, by major importers and exporters of services from/to Poland (USD billion)
21.81 7.47 6.41 5.66 5.55
0 10 20 30 40 50
Germany United Kingdom Switzerland Netherlands United States
Source: Deloitte based on Statistics Poland (GUS) data
Foreign direct investment in Until 2017, the United Kingdom was destinations in Central and Eastern Poland the fifth largest investor in Poland (in Europe. The entire region has held Foreign direct investment (FDI) in terms of direct investment), having much appeal for investors on account Poland accounts for over 45% of GDP, invested PLN 48.1bn, compared with of its convenient location and economic whereas Poland’s direct investment PLN 167.6bn invested in Poland by the growth outpacing that of Western abroad represents a mere 5.4% of leading investor – Germany18. Foreign Europe. Key advantages included lower GDP17. What this gap goes to show direct investment (FDI) is growing in labour costs, combined with a high is, on the one hand, the important both countries, but in recent years the skills base and productivity of local role of foreign capital in Poland and, rate of its growth has been faster in the workforce. Foreign investment was on the other, the vast potential for UK. In the case of Poland, this may be facilitated by the accession of most foreign expansion by Polish companies, attributable to relatively the fast GDP CEE countries to the European Union, provided that Poland continues to growth throughout this period. which guaranteed free movement of develop, particularly in terms of capital, as well as the regulatory and accumulation of business capital and For a number of years, Poland has institutional harmonisation for the building of competitive advantages. been one of the most attractive FDI purposes of the EU’s single market.
Figure 9. Value of FDI in Poland and the UK (as % of GDP of the host country)
70
60
50
40
30
20
10
0 2011 2015 2012 2017 2013 2016 2014 2010 1997 1995 1998 1996 1999 2002 2007 2001 2003 2005 2009 2008 2006 2000 2004
Poland United Kingdom
Source: Deloitte based on UNCTAD data
21 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Migration What made the United Kingdom peaking in 2006: when 46,800 people The UK was notably one of only three attractive to Poles was mainly the left Poland to take permanent residence countries that opened their labour widespread knowledge of the English in another country. While in 1989 the markets to Polish workers as soon as language and high wage levels percentage of Polish migrants who Poland joined the European Union (compared with Poland). As a result, decided to stay in the United Kingdom in 2004, which triggered a mass inflow up until 2016 the numbers of Poles amounted to less than 1%, in 2013 it of Polish migrants, currently the most migrating to Great Britain was great came to almost 30%.20 numerous national minority in the than the number of Poles returning United Kingdom19. to Poland, with the migration level
Table 2. Foreign migration (permanent residence or stay of over 12 months) in 2000 and 2016
Balance per Year Immigration Emigration Balance 1,000 residents 2000 7,331 26,999 -19,668 -0.5 Poland 2016 208,302 236,441 -28,139 -0.7
2000 364,370 277,562 86,808 +1.5 United Kingdom 2016 588,993 340,440 248,553 +3.8
Source: Deloitte based on Statistics Poland (GUS) data, Demographic Yearbook 2018.
As far as temporary migration is Germany (385,000), but in 2010 the concerned, in 2005 the largest number leader was already the United Kingdom of such migrants were residing in (580,000 vs 440,000 in Germany)21.
Table 3. Estimated temporary migration from Poland in 2004–2017 (number of persons residing abroad at year end)
2004 2005 2010 2011 2012 2013 2014 2015 2016 2017
Total 1,000 1,450 2,000 2,060 2,130 2,196 2,320 2,397 2,515 2 540
EU 770 1,200 1,685 1,754 1,816 1,891 2,013 2,098 2,214 2,241
United Kingdom 150 340 580 625 637 642 685 720 788 793
Germany 385 430 440 470 500 560 614 655 687 703
Netherlands 23 43 92 95 97 103 109 112 116 120
Ireland 15 76 133 120 118 115 113 111 112 112
Italy 59 70 92 94 97 96 96 94 93 92
Norway 50 56 65 71 79 84 85 85
France 30 44 60 62 63 63 63 64 64 64
Source: Deloitte based on Statistics Poland (GUS) data
22 Polish-British cooperation over the past 30 years
An increase in the number of migrant to NBP data for 2016, 34.2% of all Polish workers from Poland supports the work migrants remitted home a part UK’s economy and budget revenues. of their earnings22. The World Bank At the same time, it presents an data indicates that remittances from expansion opportunity for Polish the United Kingdom to Poland in 2017 businesses, especially food companies were the second highest (after those (on the growing popularity of Polish from Germany), having amounted to brands). The relatively higher earnings USD 1.15bn or 0.22% of Poland’s GDP, of Poles working in the UK are also compared with the 1.3% share in GDP of a source of additional capital available total remittances23. for consumption in Poland. According
Tesco – CSR grant programme
Under the ‘You decide, we help’ grant programme, the Łódź Circle of the St. Albert Chmielowski Aid Society won a grant of PLN 5,000 and implemented the ‘Climbing to joy’ project, building a new playground for little residents of a women and children’s shelter. The shelter accommodates families in distress, which is why it is so important to provide the children, in addition to meeting their basic needs, with a safe environment for carefree play. The aim of the project was to build a playground, the grant having been used by the charity to buy recreational equipment and then, with the help of volunteers, arrange the necessary space. The organisers also held an outdoor event to celebrate the playground’s opening, featuring cooking workshops, circus performances, as well as tai chi shows and lessons.
23 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Table 4. Money remitted to Poland by migrants in 2017
Percentage Number of Remittances Remittance per Percentage of total migrants (USD million) migrant (USD) of GDP (%) remittances (%) (thousands) Germany 2,117 31.1 703 3,011 0.40
United Kingdom 1,149 16.9 793 1,450 0.22
Netherlands 143 2.1 120 1,190 0.03
Ireland 205 3.0 112 1,183 0.04
Total 6,805 100.0 2,540 2,680 1.29
Source: Deloitte based on Statistics Poland (GUS) and World Bank data
Drivers and prospects for future economic relations between Poland and the United Kingdom – econometric analysis
International trade is a major factor Kingdom could increase under various partners in 2018 could be explained determining the importance of economic growth scenarios. It should by the sizes of the two economies mutual relations between countries, be noted that in the case of GDP growth concerned (Figure 10). Then again, businesses and individuals. The forecasts we can rely on a number a key determinant of the directions relationship between trade and of independent, objective sources. of Poland’s foreign trade in the past economic growth is quite interesting, Moreover, both the literature and 30 years was Poland’s accession to the as the former can contribute to the practice of economic analysis provide European Union, whereupon Poland latter (especially GDP growth), while the sophisticated models whereby trade was included in the European common latter creates new opportunities for the volumes can be projected based on market, where free movement of goods, former. available macroeconomic forecasts. capital and people is governed by a uniform legal framework. For the purposes of this report, we As much as 71% of the value of have examined how much trade exports and imports of goods flows between Poland and the United between Poland and its trading
24 Polish-British cooperation over the past 30 years
Figure 10. Trade between Poland and a given country depending on the size of both economies in 2018
16 UK DE 14 FR ES IT NL IE AT SE BE 12 FI DK PT CZ EL RO HU SK LT 10 LV CY EE
MT 8
6 of Poland's and given country's GDP The natural logarithm of the products
4 R2= 0.71
2
8 10 12 14 16 18 20 22 24 26
The natural logarithm of trade between Poland and a given country (import + export of goods)
Reality Model
Note: The model defines trade volumes projected by the econometric model estimated by Deloitte – details below in Table 5. Source: Deloitte based on UN and IMF data
Econometric analysis of foreign trade in goods for Poland
Methodology – gravity model
In analysing international trade or The force of gravity depends on the The sum of foreign trade (exports and migration flows between countries, mass of objects and the square of imports) between countries depends economists often employ gravity their distance. G is a physical constant. on the gross domestic products (GDP) models. Their underlying principle is The same holds true for trade flows in of both countries and their broadly similar to that in physics, in which the economy: defined distance. Their distance can force of gravity is described by the be understood as the physical distance following formula: PKB PKB between the capital cities, the average EXP_IMP = C i j ij D customs duties between the two M M ij countries or their linguistic, institutional F = G i j ij 2 or political proximity. Dij
25 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Econometric approach
A simplified gravity model of Poland’s Results delivered by the model. •• show that both Poland’s and the trade in goods has been estimated Despite being based on a relatively low trading partner’s membership in the based on the product of Poland’s GDP number of variables, our model well EU in a given year is correlated with and that of its trading partner, Poland’s reflects the data (see the actual trade a 0.2% increase in trade, and the trading partner’s membership and values projected by the model in •• indicate a high volume of trade in in the EU and variables capturing the Figure 16). Its estimates: goods between Poland and the United specific features of each country (they •• explain as much as 93% of the Kingdom – it is 3.7% above the volume can be thought of as the aggregate variations in Poland’s trade flows estimated based on both countries’ distance from Poland, access to the with 185 countries in 1995–2018, GDP and their broadly defined sea, structure of manufacturing output, •• show that a 1% increase in the distance (Table 5). etc. – without them, the results would product of Poland’s GDP and that of have been significantly averaged its trading partner is correlated with for 185 countries). a 0.9% increase in trade,
Table 5. Results of the estimation delivered by a panel gravity model for Poland’s foreign trade in 1995–2018
Estimation Relative error (%) 4,169 Number of observations Pr. of GDP 0.873*** 2.18
EU 0.221*** 34.8 185 Number of countries United Kingdom 3.646*** 8.67
Constant 7.250 *** 3.67 0.9274 Adj. R-squared
Source: Deloitte
Figure 11. Growth in Poland’s trade with the UK Figure 12. Growth in Poland’s trade with the largest EU in 1995–2018 – actual vs estimated by the model (%) member states in 1995–2018 (%)
510 606 510 427 298 360
Reality Model Italy Germany UK France
Source: Deloitte based on UN and IMF data
26 Polish-British cooperation over the past 30 years
Poland’s opening up to Western model (Figure 12). It was the second clearly linked to an increase in the markets after the fall of communism highest growth among the four largest flows of goods – result based on review and its accession to the EU (with EU member states in the period, of 48 studies (Nijkamp et al., 2013). the resulting opening of the British exceeding even the 427% growth in Following Poland’s accession to the labour market to Polish workers) Poland’s trade with Germany (Figure 13). EU, its trade flows with the UK grew boosted trade flows with the United Its key stimulant was probably the faster than the rate projected by our Kingdom. In 1995–2018, they grew immediate opening of the UK labour model based on GDP and the distance by 510% in real terms, significantly market to Polish workers, as migration between the countries. more than the 298% estimated by our flows between the two countries are
Figure 13. Trade flows between Poland and the UK in 1995–2018 – predicted by the econometric model vs actual (values for 1995 = 100)
25
20
15
10 Trade between Poland between Poland Trade and the UK (USD billion) 5
0 2011 2015 2012 2017 2013 2016 2018 2014 2010 1997 1995 1998 1996 1999 2002 2007 2001 2003 2005 2009 2008 2006 2000 2004
Reality Model
Note: Values shown in the graph are expressed at constant prices (adjusted for inflation) and may therefore differ from those given in the text, which are expressed at current prices (unadjusted for inflation). Source: Deloitte
Reasons for the rapid growth becoming more competitive on of trade in goods between a depreciation of the Polish złoty Poland and the United against major currencies (including Kingdom the British pound), as well as a slow The discrepancy between trade increase in labour costs in Poland, volumes projected by the model and especially in relation to other countries those actually recorded widened of the region. As a consequence, noticeably after the outbreak of the despite a weaker rate of economic financial crisis (that is after 2009), growth, trade flows between the UK chiefly as a result of Poland’s economy and Poland were on the rise.
27 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Competitiveness in exports – changes in labour cost based currency exchange rates
Figure 14 depicts the so-called real and 2007, which was attributable to to 120–130 points, for Poland it effective exchange rates (i.e. the real their fast-paced economic growth remained below 100 points, the lowest values of the respective currencies combined with foreign capital inflows, level among all Central and Eastern taking into account labour costs24, strengthening local currencies Europe’s countries, largely sustaining REER) for selected European economies (including the złoty). After the crisis, the strong growth momentum of in 2000–2013. It shows clearly that REER differences in REER became more Poland’s exports, including those grew strongly for Central and Eastern pronounced across the region: while destined for the United Kingdom. Europe’s countries between 2000 REER for Bulgaria and Slovakia rose
Figure 14. Real effective exchange rates (REER) for selected European countries in 2000–2013
160
140
120
100
80
60
40
2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
BG CZ HU PL RO SK
Figure 15. Real effective exchange rates (REER) for selected European countries in 2000–2013
140
120
100
80
60
40
2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
DE FR GB PL IT
Source: Bruegel, Real effective exchange rates for 178 countries: a new database, https://bruegel.org/publications/datasets/real-effective-exchange-rates-for- 178-countries- a-new-database/ For Q1 2008, REER is 100
28 Polish-British cooperation over the past 30 years
It should also be noted that during Under our model, trade flows between that exports of goods increased by the post-crisis period (especially Poland and the UK are expected to a quarter, whereas exports of services in 2009–2012) the British pound was remain on an upward trend in the almost doubled25. also relatively weak, which could coming years. Based even on the IMF’s support Polish imports of goods most recent forecast for the UK’s GDP The United Kingdom is Europe’s leader and services from the UK. As the growth (from April 2019), the model in exports of services, having supplied econometric model captures only predicts a continued increase in trade close to 6.5% of services exported the overall trade flows (imports plus between the UK and Poland in the years globally in 2018 – the largest share exports), it is impossible to indicate to come. among all EU member states. Similarly with absolute certainty which of them to exports of goods, exports of services contributed more to actual trade flows Trade in services can also be measured using a gravity being higher than those predicted by the Services are increasingly important model.26 model. However, the available data and for developed economies. Until 1980, analyses suggest that the main growth global exports of goods accounted driver was an incommensurate (relative for 18% of gross world product, while to GDP growth) increase in exports from exports of services – for barely 4%. Poland to the UK, supported additionally In 2018, the respective proportions by the UK-bound migration. changed to 23% and 7%, which means
Figure 16. Trade in services between Poland and a given country depending on the size of both economies in 2017
16 US CN
JP DE IN FR UK 14 BR IT KR RU ID MX AU CA ES SA NL TW TR IR BE SE 12 TH NG AE NO CH CO IL AT CL PE PK VN ZA MY HK SG IE QA FI DK VE BD NZ EG CZ DZ PT RO HU KZ 10 GT ET KE KW R2= 0.46 SK GH BG LB PA JO TN LU CM BO BH UZ SI LT LY TM AZ RS LV SV KH 8 UG BA EE CY ZW ML SN AK of Poland's and given country's GDP
The natural logarithm of the products MU MT MK CG MN SZ KG 6 LR SL SR
SC KN
4 6 8 10 12 14 16
The natural logarithm of trade between Poland and a given country (import + export of goods)
Source: Deloitte based on Statistics Poland (GUS) and IMF data
29 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
The United Kingdom is Poland’s the UK account for ca. 8% of Poland’s of the United Kingdom in Poland’s second largest trade partner in international trade in services – the trade in financial services, cultural and services, with financial, cultural, second highest level, preceded only recreational services, legal services recreational, legal and R&D services by trade flows with Germany. In many and R&D services amount to as much as the key items of total service flows. categories that level is even higher. as 25%, 21%, 19% and 16% (Figure 18). Services traded between Poland and In particular, the respective shares
Figure 17. Poland and the UK’s trade in services (imports + exports) in 2017 by category as % of Poland’s international trade in services
Financial services 25.2
Cultural and recreational services 20.9
Legal services 18.7
Research and development services 16.1
Telecommunications, IT and information services 14.9
Accounting, auditing and tax consulting services 13.2
Fees for the use of intellectual property 12.5
Other services 12.1
Economic consulting services and public relations 11.9
Insurance services 9.3 Marketing services in the field of market 8.3 and public opinion research All services 7.7 Technical services related to trade 7.6 and other business services % of Poland's international trade in services Transportation services 5.1
Processing 4.5
Repair 4.1
Construction services 3.1
Traveling abroad 3.0
Source: Deloitte based on Statistics Poland (GUS) data
30 Polish-British cooperation over the past 30 years
Foreign trade in value added
Products exported by a country, between countries make the total value value added of such exports originates such as cars, are manufactured of trade considerably higher than the in other countries (C, D). A good case using other imported goods and real value added created within their in point are iPhones, whose nominal services, e.g. machinery and raw respective economies in making these exports from China to the United States materials. This means that the value intermediate goods. are immense, but only less than 10% added in a country’s exports is only of their value is created in China itself partly created within its domestic Similarly, in global value chains it is (as the manufacturing process in economy. What is more, multiple often the case that a country (A) may China involves only the assembly of flows of intermediate goods (used to export goods of a significant nominal components imported e.g. from Japan manufacture a final good, such as a car) value to country B, albeit most of the and South Korea).
Figure 18. Comparison of exports (in 2015) between Poland and its major trading partners, taking into account trade in value added
100 50000
90 45000
80 40000
70 35000
60 30000
50 25000
40 20000
30
Poland's exports (USD million) 15000
20
10000 Proportion of value added in trade (%)
10 5000
0 0 Germany United Kingdom France Czech Republic
Export Export (value added) % Source: Deloitte based on OECD
31 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 19. Comparison of imports (in 2015) between Poland and its major trading partners, taking into account trade in value added
100 50000 90 45000 80 40000 70 35000 60 30000 50 25000 40 20000 30 15000 Proportion of value added in trade (%) 20 10000 10 Trading partner's exports to Poland (USD million) 5000 0 0 Germany United Kigndom France Czech Republic
Export Export (value added) %
Source: Deloitte based on OECD
For this reason, metrics have been for all its major trading partners, Czech exports to Poland is only 64%, developed to capture the trade in value approximating 73% (Figure 18). which can be explained by the fact the added, offering an insight into the Interestingly, the corresponding Czech Republic is less economically actual share of value added generated proportion varies widely in the case of developed than the other countries within a given country. Figures 19 Poland’s imports (i.e. goods exported reviewed, and that it trades heavily in and 20 show the nominal exports from to Poland by its major trading partners). intermediate goods (see the example and imports to Poland and Poland’s In this respect, the United Kingdom discussed above). What can be inferred main trading partners (Germany, the emerges as the clear leader – with from this data is that the UK’s exports UK, France and the Czech Republic), almost 83% of the value added in its to Poland involve goods in which the as well as the value added embedded exports to Poland being generated on former is relatively more specialised in both measures, created within the the British Isles – followed closely by than other countries, which proves respective countries. The contribution France and Germany (78% and 77%, that the trade links between the two of domestically produced value added respectively). On the other hand, the countries are stronger than the official in exports from Poland is similar share of the domestic value added in trade data would suggest.
Summary
While the ties between Poland to the European Union triggered Polish goods, after Germany and the and the UK have been historically a rapprochement between the Czech Republic. After accounting for strong, especially the last quarter of countries, spurring a significant increase inflation, the value of trade between the a century has seen their significant in mutual trade flows, which grew from two countries rose more than fivefold tightening and deepening across less than USD 2.5bn (at current prices) between 1995 and 2017 (510%). a number of dimensions, spanning the in 1995 to almost USD 23bn in 2018 economic, social and political spheres. (at current prices). With this the UK In particular, Poland’s accession became the third largest importer of
32 Polish-British cooperation over the past 30 years
Industries with the highest British value added component in exports from the UK to Poland
Figure 21 presents the total value of previous paragraph. A closer look reveals topping 80% in agricultural production exports from the UK to Poland, as well as that the level of value added generated and mining (83% and 88%, respectively), the proportion of value added generated within the UK in British exports to Poland and coming to the remarkable 90% in within the UK, by sector. It thus highlights varies considerably between sectors: it services. The proportion is at its highest the sectors contributing the most to the tends to be lower in manufacturing in the case of IT and communication– high proportion of domestically (only 74% for computers and electronic related services (93%). produced value added referred to in the equipment27, and 75% for machinery),
Figure 20. Exports of goods and services from the UK to Poland in 2017, by sector
100% 2 000 90% 1 800 80% 1 600 70% 1 400 60% 1 200 50% 1 000 40% 800
Exports million) (USD 30% 600 20% 400 10% 200 0% 0
Mining
Manufacturing: chemicals Agriculture, forestry, fishing Services: transport and trade Manufacturing: food and drinks Services: IT and Services:communication finance and insurance
Manufacturing: machine production
Manufacturing: computers and electronic equipment
The value of exports from the % of the value added generated United Kingdom to Poland in Great Britain
Source: Center for International Development at Harvard University
33 British investment and its importance for the Polish economy
Introduction
Based on the available economic data, in foreign markets, especially those sectors. Most of the value added Poland still needs an inflow of foreign where capital is scarcer. The British in Polish economy is created in investment given its relatively limited also need to diversify their capital the manufacturing sector (33.2%) domestic capital reserves. To enhance investments. Therefore, as far as and in wholesale, retail trade and productivity and innovation levels, capital movements are concerned, repair of motor vehicles (20.2%). In it also needs a sustained inflow of the two countries have converging the UK, most of the value added is technologies and know- how. interests. generated in wholesale, retail trade and repair of motor vehicles (17.5%) At the same time, the UK economy Another important driver of trade and in manufacturing (15.6%). This data is far richer in capital, which limits and capital flows between the two implies that the manufacturing sector potential returns on investment countries is that the Polish and UK in Poland contributes twice as much to achievable domestically and prompts economies vary substantially in GDP as it does in the UK. investors to look for attractive yields terms of the structure of their key
34 British investment and its importance for the Polish economy
Figure 21. Gross value added in 2017 industry breakdown – Poland
2% 3% 1%
3% Manufacturing Information and Mining 4% communication
6% 33% Trade and repair Professional, scientific Real estate 6% of vehicles and technical activities market services
7% Transport Energy production Water supply and and storage waste management 7% 20% Construction Administration and Accommodation 7% support activities and gastronomy
Source: Deloitte based on Eurostat data
Figure 22. Gross value added in 2017 industry breakdown – UK
2% 2% 1%
3% Manufacturing Information and Mining 4% communication 18% 7% Trade and repair Professional, scientific Real estate of vehicles and technical activities market services 9% 16% Transport Energy production Water supply and and storage waste management 11% 16% Construction Administration and Accommodation 11% support activities and gastronomy
Source: Deloitte based on Eurostat data
35 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Effect of foreign direct investment on the host economy
The economic theory has identified a number of ways in which foreign investment can affect the economies of the target countries. Such effects can be both positive and negative.
Positive effects
Direct effects – Foreign investment productivity and consequently wages. opportunities, raise the efficiency of means an inflow of capital which Thanks to the inflow of foreign capital, the host country’s businesses working directly affects the host country’s Poland and other countries in Central as suppliers for foreign investors. At economy both in the short and long and Eastern Europe have not been the same time, such cooperation with terms. In the short term, an inflow of forced to reduced private consumption foreign companies on the domestic additional resources to the economy and public services as much as the market is often the first step for boosts its internal demand, regardless Asian Tigers had to do to sustain their Polish producers in becoming part of of whether it involves greenfield growth rates when their economies international supply chains, allowing projects or acquisition of existing were at a similar stage. them to increase business scale enterprises or assets. A foreign investor and specialisation levels, leading to building a new factory will buy services Indirect effects – Effects of the efficiency gains. Foreign companies and goods from local suppliers, while transfer of knowledge and new themselves often act as suppliers to an investor acquiring an existing plant technologies from foreign companies local producers, providing them with will transfer new funds to its former to the host country’s economy. These higher quality goods and services, owners, who will be able to reinvest or are not limited to enterprises directly which in turn allows them to improve spend them on consumption. In the acquired by foreign owners, as new production processes. Finally, it should longer term, an inflow of foreign capital organisational solutions are spread to be remembered that nothing raises means that more investments can be domestic businesses by staff turnover. productivity more than increased financed than would be possible if only High standards and detailed procedures competition – foreign market entrants domestic savings were available, giving imposed on local suppliers working for force their local competitors to work workers access to better machinery foreign-owned companies, combined harder, which ultimately benefits and equipment, which raises labour with training and technical support consumers.
Negative effects
In certain circumstances, foreign a distorted competitive environment in the host country’s market, which investment may also have a negative may outweigh the benefits of foreign is otherwise protected by customs effect on the host country’s economy direct investment (FDI). Another threat duties or a regulatory ring fence against if foreign investors benefit from is that foreign companies may gain competition from companies located excessive tax preferences or if a monopolistic position in specific outside its territory. Fortunately, as targeted investment outlays are made sectors, with consumers ultimately a member of the EU, Poland remains from the state budget (e.g. on new bearing the brunt. This may happen exceptionally open considering the size roads). In such cases, the negative especially in closed economies, in of its economy. consequences in the form of a higher which a foreign investor buying local tax burden on local businesses and factories effectively gains a foothold
Source: Deloitte
36 British investment and its importance for the Polish economy
Effect of foreign capital on economic growth
Foreign investment has always studies help resolve which of them Having reviewed 23 publications, the attracted a lot of attention from the will prevail. In their review based authors estimate that the FDI effects general public and decision makers on 108 published studies, Iamsiraroj on the economic growth of the region’s alike, being the subject of numerous and Ulubaşoğlu (2015) conclusively countries may be almost twice as studies. Politicians all over the world, point to the prevalence of positive FDI strong as in the case of other countries including Poland, are keen to attract effects on the economic growth of throughout the world, but they foreign capital, especially large host countries. The authors also draw emphasise the relatively limited amount investment projects. attention to an economy’s openness of research carried out to date and, and development of the financial consequently, the high uncertainty of its In a situation where the economic system as contributory factors. The findings, which in practice means that theory indicates the probability of findings of a similar review concerning further, more detailed studies could both positive and negative FDI effects post-socialist countries (Iwasaki and reveal these effects to be in fact smaller. on a country’s economy, empirical Tokunaga, 2014) were less conclusive.
The available estimates indicate that British foreign investment has had a materially positive effect on Poland’s economic growth.
6% 17% According to the most conservative scenario, only Based on the model proposed by Iamsiraroj and by increasing the available base of capital resources, Ulubaşoğlu (2014), in 1995–2014 alone the inflow of foreign by 2015 FDI had raised Poland’s GDP by about 6%. investment increased Poland’s GDP by an estimated 17%.
0.3–0.8% PLN 15bn If the Iamsiraroj and Ulubaşoğlu (2014) methodology is Assuming the most conservative estimate which only takes applied to determine the British companies’ effect on into account better workplace equipment, in 2017 alone Poland’s economy, their investments can be estimated British investments helped the Polish economy produce to have lifted Poland’s GDP by some 0.3%–0.8%. PLN 5bn more in the worth of goods and services. However, This may seem a modest contribution, but it is worth if we also take into account the inflow of technologies and remembering that in 2016 Poland’s GDP amounted to know-how both to companies controlled by British owners PLN 1,861tn, while British investments made in Poland and to the entire economy, this effect will expand to by 2016 had totalled PLN 41.8bn. PLN 15bn annually.
37 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
FDI effects can be analysed not only to the fact that foreign investors are at the macroeconomic level, i.e. for more likely to acquire larger and more the entire economy, but also at the highly geared companies. Secondly, they microeconomic level, i.e. for individual have compiled a collection of 850 pairs enterprises. However, whichever of reasonably similar companies one approach is taken, the findings are remaining in the hands of domestic broadly similar. Based on a review owners and the other having been of 52 microeconomic studies, Bruno acquired by foreign investors, and have and Cipollina (2018) have confirmed demonstrated that productivity gains the positive FDI effects on companies are faster among the latter. in EU countries that go definitely beyond the direct impact of capital Notably, the benefits of a foreign inflows and are also attributable investor’s entry are particularly to the transfer of technologies and marked when the investor comes from superior organisational solutions. a more developed, richer country Moreover, foreign-owned companies with higher quality economic and tend to perform better not because political institutions. What this means foreign investors pick more efficient in practical terms is that Poland stands companies as targets, but thanks to to gain more from investments coming their improved management later from the UK, than for instance those on(Lindemanis, Loze, Pajuste, 2019). coming from China or India. Firstly, the cited authors have pointed
38 British investment and its importance for the Polish economy
Sage – international IT and HR shared services centres
In 2017, two shared services centres The second centre is an HR HUB were launched in Warsaw by the Sage responsible for HR processes and Group, one of the world’s largest services covering over producers of business software, listed 4,000 employees of the Sage Group on the London Stock Exchange and based in six countries (Poland, the included in the FTSE 100 index. UK, Ireland, Spain, Portugal and France), using the latest technologies The first one is an R&D centre (self-service solutions, cloud platforms). developing the Sage Group’s most Both centres are being continually advanced global ERP developed. systems relying on cloud technologies and used by companies all over the world, including in the US, UK and France.
Public policies in the UK supporting competitiveness of the economy
The UK’s Industrial Strategy, a white strategy proposes an increase in R&D paper prepared by the UK government expenditure (to 2.7% of GDP in 2027), in 2017, sets out the objectives of the more funding for higher education and industrial and infrastructure policy research institutions in selected fields for the coming years. Its proposed (e.g. artificial intelligence), as well as solutions and reforms are based the launch and roll-out of Sector Deals, around five foundations of productivity: which aim at facilitating the operation Ideas, People, Infrastructure, Business of businesses in the sectors concerned, Environment, and Places. The thus boosting their productivity.
39 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
UK-based companies in Poland
UK-based companies have contributed total staffs of more than 110,00028. In 38,000 employees) and retail to Poland’s strong economic growth addition, UK-based financial services (69 companies, 43,700 employees). over the past three decades. According companies present in Poland employ There are also a multitude of specialised to the most recent Eurostat data, over 4,000 people, bringing the total to firms engaged in professional, scientific in 2016 there were 387 UK-based approximately 115,000. and technical activities – there were 74 non-financial sector companies of them in 2016, but being smaller operating in Poland with a headcount UK-based enterprises operate mainly in size, they employed total staffs of of 10 or more, altogether employing in manufacturing (127 companies, only 13,000.
Figure 23. UK-owned non-financial sector companies in Poland by Polish Classification of Business Activities (PKD) section (number)
6 4
10 16 Manufacturing Transport Real estate 26 and storage market services 127 Construction Accommodation Administration 51 and catering services and support activities
Wholesale and retail Information and Others trade, vehicle repair communication 69 78
Figure 24. Employees of UK-owned non-financial sector companies in Poland by Polish Classification of Business Activities (PKD) section (thousands)
2 0 1
4 4 5 Manufacturing Transport Real estate and storage market services
14 44 Construction Accommodation Administration and catering services and support activities
Wholesale and retail Information and Others trade, vehicle repair communication 38
Note: The data covers non-financial sector enterprises with 10 or more employees. Source: Deloitte based on Eurostat data
40 British investment and its importance for the Polish economy
Also worthy of note is the share of with a 32% market share29 (2018), financial sector companies (insurers, generating close to PLN 1.7bn in annual consumer loan providers) in the total revenue30. The economic and social population of UK-owned companies importance of the sector stems from operating in Poland. As regards the the fact that, like in any other country, (non-bank) consumer lending market, there is a considerable group of Polish which is highly fragmented in Poland consumers to whom bank lending is not (approximately 400 entities), its available31. undisputed leader is Provident Polska S.A.,
Provident Polska – long-term relationships. Real impact on the economy
Provident Polska is a member of the International Personal Finance Group, which is listed on the London Stock Exchange, and on the parallel market of the Warsaw Stock Exchange since 2013. The company’s presence in Poland dates back over 20 years. As the first and so far the only company not listed on any of the WSE’s main indices, Provident Polska has been awarded a RESPECT Certificate, confirming compliance with the CSR standards of the Warsaw Stock Exchange. Provident Polska’s business is run responsibly and taxes are paid in Poland. Its contribution to the state budget in 2018 totalled PLN 220m, of which PLN 81.6m was paid in CIT. The company has approximately 1,800 employees and 4,500 customer service advisors throughout Poland32. In 2016–2017, it worked with more than 1,830 business partners, of which 97% were Polish suppliers.
Provident stands out for its activity in support of self-regulation, giving absolute priority to financial education as well as clear and transparent communication with customers. The company initiates and drives industry self-regulation, making a real contribution to improving standards, while supporting initiatives to promote good practice in the financial sector. A key focus of its activities is on community engagement through various initiatives, including an employee volunteering programme, which has been in place for 12 years.
Provident’s position as the industry leader, large customer base and well-developed supply chain allow it to exert real influence on the service standards offered by many market participants important to the Polish economy. These strengths are leveraged by the company to promote best practices in its CSR areas, from ethical standards, to responsible approach to HR management and sales of financial products, to corporate citizenship.
41 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Aviva Polska
Aviva (then trading as Commercial Union) decided to invest in Poland at an early stage of its political transition, having secured an insurance licence in 1991 and issuing its first policies a year later. After 27 years, it has grown into the largest UK investor active in the Polish financial sector, its operations covering the insurance, pension fund, investment fund and asset management markets (with over PLN 50bn in customer assets). In 2018, it paid out PLN 331m and PLN 192m, respectively, in life and non-life insurance benefits. In 2015, Aviva acquired Expander Advisors, a leader of financial intermediation services in Poland. It also set up a company in Lithuania, which has operated since 2001 and is currently the second life insurer in terms of premium income.
UK-based companies greatly more than 11% of all foreign BPO contribute to the development of centres located in Poland (employing the business process outsourcing over 25,000 people). (BPO) sector in Poland. In 2018, the number of BPO centres in Poland Interestingly, their geographical came to 1,236, employing total staffs of distribution was uneven: while almost 280,000. Importantly, 839 (68%) employees of UK-owned service of them were centres of corporations centres accounted for merely 5% of all based abroad, run mostly by companies BPO staff in Wrocław and the Tricity, located in the United States (261) the corresponding percentages and Nordic countries (125). What is were 13% for Poznań and 15% for noteworthy, the third largest group Kraków, where UK-owned centres were of business process outsourcers only surpassed in employee headcount were companies based in the UK: by their US counterparts. with 95 locations, accounting for
Figure 25. Number and headcount of BPO centres in Poland
102 7%
5% 52 United Kingdom USA 39 6% 397 29% 77 Germany Poland 6% Total: Total: 88 1,236 centres 279,000 people Switzerland Nordic countries* 9% 95 Asian countries** France 19% 261 9%
125 Other countries 10%
*Nordic countries: Sweden, Finland, Denmark, Norway **Asian countries: India, Japan, South Korea, China, Israel, Qatar, Turkey, Singapore
Source: ABSL
42 British investment and its importance for the Polish economy
GSK – innovation across many dimensions
The amount invested in Poland by GSK over the last two decades is PLN 2bn. The company has upgraded and expanded its drug manufacturing plant in Poznań, built 5 competence centres and conducted 50 clinical trials. It has about 2,000 employees and pays about PLN 250m annually in taxes.
A leading global company in the healthcare sector and an investor in the Polish pharmaceutical industry, GSK made its first investment in Poland back in 1998, when the drug plant in Poznań was integrated into the GSK global manufacturing network. Over that time, the company has transferred 81 drugs into production at its Polish plant, significantly raising the overall volume of pharmaceuticals manufactured in Poland. The plant’s daily output comprises 8.7 million tablets and 1.3 million capsules. Today its products are exported to more than 130 global markets, up from about 20 in 1998.
In 2017, a new investment project was launched by GSK involving the manufacture of innovative patent-protected drugs used in HIV treatment. Applied on a global scale, these therapies are included in key international guidelines and on the WHO Essential Medicines List. From the capital of Greater Poland they reach patients in about 130 countries. These are another antiretroviral drugs that are produced in Poznań. The first transfers of drugs used in the treatment of HIV went to the GSK factory in Poland in 2006, and subsequent ones took place already in 2012.
On the back of its successful upgrade and expansion of the plant, in 2005 GSK made a decision to develop several competence centres. The largest one is the GSK IT Business Services Centre, currently employing 700 people, while the newest one, launched in 2019, is the GSK Finance Hub, which will soon offer 300 finance specialist jobs. The other centres are engaged in pharmacovigilance, marketing and medical projects, we well as registration matters.
UK-owned companies stand out in fixed assets – while UK-based from their local counterparts companies do invest much more per for significantly higher labour employee than their Polish peers in productivity, which could partly be the vital manufacturing sector, the explained by larger scale of business. picture is not that obvious in other On average they have almost 5 times sectors, suggesting that better work more employees and, despite some organisation and intangible assets (such variation from one industry to another, as knowledge, know-how, data, software in none of them are they outmatched and applications) may also be major in size by the average local business. contributors to the higher productivity Interestingly, the higher productivity is of UK-owned companies. not clearly correlated with investments
43 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 26. Labour productivity of UK-owned versus domestically-owned companies in Poland
300% 80
70 250%
60 200% 50 150% 40
(EUR thousand)(EUR 30 100% Productivity of UK-owned Value added per employee employee per added Value
20 vs domestically-owned companies 50% 10 0% 0
Total Transport Transport Real estate Information Information and storage Construction market servicemarket Manufacturing Accommodation support activitiessupport Administration and trade, vehicle repair trade, vehicle and communication and Wholesale and retail retail and Wholesale and catering services
UK companies Domestic companies Difference in productivity (right scale)
Note: Labour productivity is computed as value added per employee. The data covers non-financial sector enterprises with 10 or more employees. Source: Deloitte based on Eurostat data.
Figure 27. Relation of investments in fixed assets per employee at UK-owned vs domestically-owned companies33
3.0
2.5
2.0
1.5
1.0
0.5
0 Real estate Wholesale and Transport Information and Total Administration Professional, Manufacturing market service retail trade, and storage communication and support scientific and vehicle repair activities technical activities 2016 average 2012-2016
Note: Labour productivity is computed as value added per employee. The data covers non- financial sector enterprises with 10 or more employees. Source: Deloitte based on Eurostat data.
44 British investment and its importance for the Polish economy
HSBC Poland
HSBC’s in-country presence gives it a thorough understanding of local conditions in Poland. The HSBC Group’s business and customer service activity in Poland is carried out through the Polish Branch of HSBC France, whose growing presence has been recognised on the local market. Its focus on the corporate segment – of medium-sized and large companies with operations on foreign markets – is one of the key pillars of HSBC’s strategy in Poland, supporting international expansion of Polish companies.
HSBC’s track record of successes for Polish clients We were involved in the successful implementation of the North America Liquidity programme for KGHM Group companies in Canada and the United States. The solution has improved the liquidity and cash management at the KGHM Group.
We provided financing to TeleFonika Kable S.A. for its acquisition of the UK-based company JDR Cable Systems (Holdings) Ltd., enabling further expansion of one of Europe’s leading cable manufacturers. The acquisition of JDR was another milestone along TELE-FONIKA Kable SA’s growth path, providing it with new capabilities and access to new distribution markets, including Asia.
We provided rent guarantees and banking services to LPP S.A., a leader in retail sales of clothing in Central and Eastern Europe, supporting the launch of its flagship store in Oxford Street, London. Given the international renown of that high street location, the LPP store under the Reserved brand, with an area of over 3,000 square metres, marks a step in the delivery of the LPP Group’s global expansion plans.
HSBC is recognised as a leading international bank assisting Polish institutions and corporates in accessing new markets, investor groups as well as innovative financial tools and products. It was particularly successful in connecting Asian investors to Poland (e.g. to invest in Polish treasury bonds or collateralised mortgage obligations). HSBC’s major roles have included that of lead structurer and joint arranger of the RMB 3bn Panda bonds issue, and the EUR 750m green bonds issue for the Ministry of Finance in 2016. These deals highlighted Poland as the first country to offer Chinese investors this financial instrument. Among its recent successes is the issue of euro-denominated covered bonds carried out by PKO Bank Hipoteczny for the third time, having attracted the attention of a wide range of institutional investors from Europe and Asia. In 2019, HSBC became the arranger of a EUR 500m three-year covered bonds issue.
45 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
British companies share the effects Polish counterparts. In 2016, the contributions and in PIT remittances of higher productivity with their former spent on average 36% more in respect of a single person working employees and, consequently, per employee than local employers for a UK-owned company than an with tax authorities. In all of the (PLN 75,000, relative to PLN 56,000). employee working for a Polish company. analysed industries (as per sections While benefitting employees, the higher of the Polish Classification of Business pay was also a boon to the state budget. UK-owned companies operating in Activities (PKD)), staff costs (i.e. gross Assuming the total labour tax wedge Poland are also corporate income tax salaries or wages plus the employer’s in Poland at about 40%, in 2016 an (CIT) payers. Table 6 lists the largest CIT contributions) were markedly higher average of PLN 8,000 more was paid payers, together with the amounts of at UK-owned companies than at their in social security and health insurance CIT paid.
Table 6. Largest UK-owned companies in Poland in terms of revenue and corporate income tax (CIT) paid [PLN thousand]
2017 2018 Company Revenue CIT Revenue CIT
BP Europa SE 11,800,953 32,555 13,915,771 99,986
Tesco Polska sp. z o.o. 11,986,454 no data available 11,734,347 no data available
Shell Polska sp. z o.o. 4,987,724 25,060 5,606,466 44,560
GlaxoSmithKline Pharmacuticals S.A. 4,697,596 22,091 1,195,833 34,447
Aviva Towarzystwo Ubezpieczeń S.A. 2,304,213 117,351 2,414,914 234,053
Imperial Tobacco Polska Manufacturing S.A. 1,585,378 no data available 1,689,433 13,719
Provident Polska S.A. 1,883,148 53,628 1,686,102 81,616
DS. Smith Polska sp. z o.o. 802,352 8,313 856,870 2,981
Source: Deloitte based on Ministry of Finance data.
LUX MED Group – eHealth innovations
The LUX MED Group has long been committed to improving and deploying new digital eHealth solutions, to provide patients with faster, more convenient and more personalised access to healthcare.
One example is the Patient’s Portal, available as a website and mobile application for booking appointments, holding e-chats with doctors, reviewing referrals and collecting test results. It has become the most popular channel through which our patients book medical appointments.
Thanks to its innovative functionality, it can also be used to order electronic prescriptions, which is done quickly, conveniently and without having to leave home. In fact, LUX MED is the first private medical group in Poland to have offered such a solution. Electronic prescriptions can be filled at a selected pharmacy based on the patient’s personal identification number and a unique texted code, enjoying great popularity with patients.
46 British investment and its importance for the Polish economy
The higher productivity of UK-owned employed over 1,200 people in research R&D expenditure representing 3.6% companies compared with Polish and development departments, of value added generated by peers is also driven by another crucial compared with 13,700 at the much these companies. For the sake of aspect of their business – a high more numerous Polish manufacturers. comparison, at Polish companies level of innovation. The most recent This considerable share reflects only 1% of all employees worked comparable data published by Eurostat substantial R&D expenditure by UK- in research and development for 2015 relates, unfortunately, only owned companies: in 2015, 3.6% of departments, with R&D expenditure to the manufacturing sector. In this their total workforce were engaged accounting for 1.5% of value added. sector alone, UK-based companies in research and development, with
Figure 28. The effect of higher productivity on employee earnings at UK-owned vs Polish companies
350% real estate activities
300% administrative and support construction service activities 250%
200% information and communication manufacturing 150% transport and 2 vs Polish companies vs Polish warehousing R = 0.6204
100% accomodation and food wholesale, retail trade Employee earnings at UK-owned at earnings Employee services and repair of vehicles 50% 100% 150% 200% 250% 300%
Labour productivity at UK-owned vs Polish companies
Note: The data covers non-financial sector enterprises with 10 or more employees; labour productivity is defined as value added per employee. Source: Deloitte based on Eurostat data
47 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
AstraZeneca – construction of Global Research and Development Centre in Warsaw
In 2017, AstraZeneca resolved that its main research and development facility (the Centre) responsible for managing the late phases of clinical research should be located in Warsaw. It is the first R&D centre of this size built by a global pharmaceutical company in Central and Eastern Europe.
Since 2017 it has employed a staff of nearly 800, including over 100 PhD holders. The vast majority (95%) of the employees are Polish, thoroughly trained in R&D projects for the pharmaceutical industry. The Centre is currently running more than 60 research projects in the fields of oncology, respiratory and cardiovascular diseases. The first concrete result of scientists’ work at the Centre is an innovative biological drug used to treat severe eosinophilic asthma, approved for marketing in dozens of countries around the world, including the EU market and the US. The Centre had been responsible for all the research work that led to the therapy’s marketing authorisation; which makes it an example of the first innovative drug almost entirely developed in Poland by Poles.
AstraZeneca’s R&D expenditure in Poland was in excess of PLN 200m in 2018 and is expected to exceed PLN 300m in 2019.
Polish companies compared against foreign peers
Polish companies have been steadily at only 54% of the corresponding ratio narrowing the productivity gap to for foreign-owned companies operating their foreign peers. Local businesses in Poland34. In 2017, the ratio came learn from foreign ones, acting as to 71% (see Figure 29). The convergence their suppliers or employers, and even is faster at the largest Polish enterprises as competitors – through workforce (with 250 or more employees), which flows. In 2005, i.e. shortly after Poland’s in 2017 posted revenue per employee accession to the EU, the average Polish at 84% of the same ratio for foreign- company with a headcount of 10 or owned companies (see Figure 29). more reported revenue per employee
48 British investment and its importance for the Polish economy
Figure 29. Revenue per employee – Polish vs foreign- Figure 30. Revenue per employee – Polish vs foreign- owned companies owned companies, by employment number in 2017 71% 73% 71% 68% 70% 66% 63% 60% 61% 57%
60% 84% 56% 54%
48% 53%
10-49 50-249 250+ 2011 2015 2012 2017 2013 2016 2014 2010 2007 2005 2009 2008 2006
Note: Labour productivity is computed as total business revenue per employee, as no information on value added is available. The data covers non-financial sector enterprises with 10 or more employees. Source: Deloitte based on Statistics Poland (GUS) data
TELE-FONIKA Kable (TFKable)
In 2017, a world-class cable manufacturer, acquired the UK’s JDR Cable Systems (Holdings) Ltd. (JDR), a leading manufacturer of subsea production umbilicals and power cables. Given the two companies’ close working ties, the consolidation only crowned their long-standing business relations. The Group’s Polish factories have remained major suppliers of low, medium and high voltage sealed insulated power cores to JDR’s Hartlepool and Littleport plants. JDR’s advanced subsea systems are used by operators in the oil, gas and renewable energy sectors investing in offshore facilities on virtually every continent. The acquisition has also expanded the TFKable Group’s manufacturing capacities, adding to its existing portfolio of six plants in Poland, Serbia and Ukraine two English plants in Hartlepool and Littleport, and a service centre in Houston, the US.
Productivity improvement by Polish main industries where the latter were enterprises relative to foreign ones present. Among them, only the Polish is also visible by sector. For 2008 construction sector has failed to and later years, we have far more improve productivity relative to foreign accurate data on value added and competitors since 2008 (the ratio has employment by section of the Polish in fact declined by 1pp). In all the other Classification of Business Activities sectors, Polish enterprises have been (PKD), which offers an insight into the swiftly closing the gap: by 16pp in industry breakdown of these trends. transport, 14pp in manufacturing, 12pp In 2016, the productivity of Polish in professional and scientific activities, enterprises was lower than that of 6pp in trade and 5pp in information and foreign-owned peers across all the communication (see Figure 30).
49 Wyjątkowe partnerstwo. Relacje gospodarcze między Polską i Wielką Brytanią – współpraca na pokolenia
Figure 31. Labour productivity of domestically-owned vs foreign-owned companies (%)
100
75
50
25
0 Construction Wholesale and retail Manufacturing Information and Professional, Transport trade; vehicle repair communication scientific and and storage automotive, including technical activities motorbikes
2008 2016
Note: Labour productivity is measured as value added per employee. The data covers non- financial sector enterprises with 10 or more employees, in sectors for which Statistics Poland (GUS) reports, as a minimum, a 2% share in revenue of all foreign businesses operating in Poland. Source: Deloitte based on Eurostat data.
The productivity gap between local productive than local ones virtually of the Polish manufacturing industry and foreign companies cannot everywhere. For example, the rose 14pp, the strongest increase be completely closed, as it stems productivity of local manufacturers among all large EU economies (only from the fact that usually the most in relation to foreign ones across the Denmark and Malta having reported productive companies become EU member states in 2016 ranged a better result among smaller countries; business investors (expanding from 40% to 80% (66% in Poland, see see Figure 32). into foreign markets). As a result, Figure 31). It is worthy of note, though, foreign companies tend to be more that in 2008–2016 the productivity
Press Glass – Poland’s largest independent glass manufacturer in Europe
It currently has 800 employees across six plants in the United Kingdom, making it the market leader. In 2017, Press Glass acquired two Pilkington plants, the UK’s industrial icons, which now operate as GlassSystems (the business name used by Press Glass in England). Via its UK subsidiary, in 2017 Press Glass also acquired a manufacturing company in the US, where it has plans to build a new factory in the state of Virginia in 2019. The Press Glass CEO Tomasz Wozowicz said that, despite the current turmoil caused by Brexit, Press Glass had very high hopes for the UK market, where it wanted to consistently invest in further business development.
50 Brochure / report title goes here | Section title goes here
Figure 32. Labour productivity of domestically-owned vs foreign-owned manufacturing companies in 2016
120
100
80 66%
60
40
20
0 Italy Spain Malta Latvia France Poland Austria Croatia Greece Finland Estonia Sweden Slovakia Belgium Slovenia Portugal Hungary Romania Germany Lithuania Denmark Netherlands Luxembourg Czech Republic Czech United Kingdom
Note: Some countries have been excluded due to lack of data for 2008 or 2016. The data covers non-financial sector companies. The Eurostat data is not fully comparable here and may vary slightly depending on national methodologies – e.g. in the case of Poland companies with at least 10 employees are reported. Source: Deloitte based on Eurostat data.
Figure 33. Change in labour productivity of domestically-owned vs foreign-owned manufacturing companies in the EU in 2008–2016 (percentage points)
30
20 14%
10
0
-10
-20
-30 Italy Spain Malta Latvia Frnace Poland Austria Croatia Finland Estonia Sweden Demark Slovakia Slovenia Portugal Hungary Romania Germany Lithuania Netherlands Czech Reoublic Czech United Kingdom
Note: Some countries have been excluded due to lack of data for 2008 or 2016. The data covers non-financial sector companies. The Eurostat data is not fully comparable here and may vary slightly depending on national methodologies – e.g. in the case of Poland companies with at least 10 employees are reported. Source: Deloitte based on Eurostat data.
51 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
The inflow of foreign investment rate of 2.5%, accelerating to 4.1% after has been a major driver behind Poland joined the EU (2004–2018). Poland’s growth, which is consistently Currently, the International Monetary the strongest among all large EU Fund (IMF) is forecasting a 3% growth economies. In 1989–2003 Poland’s GDP rate for 2019–202435. per capita grew at an average annual
Largest UK-based companies – business expansion plans in Poland and assessment of the business environment
Leading UK-based companies and prospects. It is worthy of note operating in Poland confirm that that a relatively small sample of the Poland is an attractive growth market, surveyed companies employed despite some challenges. To probe a total of 43,000 employees and their opinions, we asked selected contractors, generated over PLN 16bn companies from different sectors how in revenue and invested more than they viewed their business environment PLN 422m (net of VAT) in 2018.
BP – pioneering changes on the Polish market
BP has introduced pioneering changes on the Polish market, discontinuing the sale of leaded fuels and rolling out top quality BP Ultimate fuels (with the Active technology in 2016), equipping all stations with vapour recovery systems, deploying double-shell fuel tanks as a standard solution, implementing HACCP (a food safety procedure), building the largest network of contactless automatic car washes that can be paid for at adjacent card terminals, offering fuel cards (BP Plus, BP Komfort Prepaid for domestic transport, BP and Aral for international fleets and fleet operators) and the multipartner PAYBACK scheme, serving coffee from professional pump espresso machines and a growing selection of foods from its Wild Bean Cafes, selling flowers at selected BP stations, and launching car-sharing services – short-term car rentals with Click2Go and long-term rentals with Sixt. Since it first established a presence in Poland, BP has consistently pursued its CSR strategy, seeing responsibility as an element of business management. In fact, it was the first company in Poland to develop a product combining business with CSR aspects – a loyalty scheme in partnership with the Polish Humanitarian Action.
All these changes have materially improved overall service standards across the Polish fuel industry. Ranking among the 500 largest companies in Poland and being the number two player on the Polish fuel market, BP employs 4,000 people directly and a further 4,000 indirectly. Over 25 years, it has invested in Poland PLN 5.5bn and paid PLN 15bn in VAT, excise and fuel taxes to the state budget. Castrol, a BP business and major manufacturer of engine oil and lubricants, develops innovative solutions, while BP’s position in the aviation fuel market has been additionally reinforced through the Lotos-Air BP joint venture.
52 British investment and its importance for the Polish economy
The majority of large enterprises base for social insurance contributions, Expected workforce levels covered by the survey expect to raise now fixed at 30 times the average over the next five years their investment and staffing levels monthly salary, or the introduction of (compared with five years over the next five years relative to the Employee Capital Plans (PPK), would five years before. At the same time, entail a rise in labour costs for British before) responses from those surveyed show employers. Especially, the lifting of the that a higher percentage expect their ceiling for social insurance contributions 27% workforce to remain unchanged due to is a cause for concern – offering more – Same or similar difficulties in attracting new staff and generous salaries than their Polish growing labour costs. counterparts, UK-based companies would be particularly affected. 45% The main barriers to development of – Increase UK-based companies in Poland include On the other hand, the availability unpredictable lawmaking and the tax of professional and managerial staff wedge, while opportunities lie in the and the favourable economic climate 18% availability of skilled professionals in Poland are viewed by UK-owned – Strong increase and managers and in the favourable businesses as key opportunities. economic climate. Reponses to These factors were highlighted questions about opportunities for by 82% and 73%, respectively, of and threats to further business those surveyed. Interestingly, none Expected investment levels development in Poland were provided of them mentioned the competitive over the next five years by a dozen or so entities, employing environment in the R&D sector in the (compared with five years a total of 43,000 people, representing context of opportunities, and only 27% about 40% of total workforce of all UK pointed to the local government’s before) businesses in Poland. grants and tax credits. This shows that the best thing the government can do 9% The most serious barrier, to support business relations between – Same or similar identified by 82% of the surveyed Poland and the UK is to focus on companies and often brought up removing the main barrier, which is the by Polish business, is the regulatory legislative unpredictability. 64% uncertainty. The issue could be – Increase addressed by more deliberate adoption Another factor working to the of new laws, more extensive and longer advantage of UK-based business public consultation and improved in Poland is the fact that Polish 9% communication from the government. employees are generally positive – Strong increase The second related hindrance involves about career opportunities at foreign- a rise in labour costs, mentioned owned companies, preferring them by 73% of the UK-based respondents. over domestic employers36. The mooted removal of the maximum
53 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 34. Top factors expected to support business expansion on the Polish market over the next five years
EU integration 82%
Macroeconomic environment in Poland 73%
Growing intergration of Poland 64% with the world economy Quality and availability of domestic suppliers 45% of goods and services Improving accessibility and quality of 36% infrastructure
Labour productivity and work culture 27%
EU funds 27%
Tax reliefs, grants and other 27% business support mechanisms Availability of qualified specialists 27% and managers
Security 0%
Competitive conditions for R&D activity 0%
Figure 35. Top factors expected to hinder business expansion on the Polish market over the next five years
Unpredictability of the lawmaking process 82%
Level of non-wage labour costs 73% (ZUS, PIT and PPK)
Decreasing availability of qualified employees 55%
Regulatory and other barriers to fair 36% competition
A complicated tax system 36%
Low level of innovation 27%
Unsatisfactory quality of regulations 27% and institutions Costs resulting from the implementation 18% of EU regulations
Demographic changes 9%
Problems in the supply chain in Poland, 0% e.g. productivity, reliability, quality
Slow resolution of court disputes 0%
Source: Deloitte study
54 British investment and its importance for the Polish economy
Standard Chartered
Standard Chartered is a leading international bank with over 160 years of history. Headquartered in the UK, it has a global network spanning more than 60 markets worldwide. Over the last two years, the bank has focused on developing its customer base in Europe and the Americas. We felt it was time to create a Western hub focused on supporting customers from the region from a more convenient time zone and location. In June 2018, we announced plans to set up such hub in Warsaw and employ a staff of 750 people over five years. The first employees joined our Warsaw team in July 2018. By the end of last year the number of professionals working for our new Polish company had reached 150, and in June 2019, on its first anniversary, the headcount came to about 350.
Our hub in Poland is a highly specialised facility focused on providing knowledge- based services to customers located mainly in Europe and the Americas, complementing the service offering of our existing centres in Asia. We focus on preventing financial crime, cybersecurity, regulatory compliance in the process of establishing and developing customer relationships, liquidity management, contract negotiation and a variety of human resources management services, including recruitment for the Polish, European and American markets. Before the decision to enter the Polish market was reached, we had undertaken extensive analyses, some of them into the availability of sufficiently skilled workforce, so we could be sure that the first recruitment processes would be successful. What is equally important, while more roles have been added to our original recruitment framework, we are still able to source quality professionals from the local market. This confirms that Poland and Warsaw have been the right choice.
Summary
For the past 25 years, foreign direct 63% of leading UK-based companies investment (FDI) has been a key driver operating in Poland expect to increase of Poland’s economy, propelling the their staffing levels, and 73% of them country towards its goal of catching are looking to invest more over the up with Western Europe. UK- owned next five years compared with the companies have made a major five years before. Poland’s integration contribution to the process, having with the EU (indicated by 82% of those invested in Poland more than PLN 48bn surveyed) and favourable economic in FDI by 2017, the fifth best result climate (selected by 73%) are the key in the category. What is more, direct factors supporting business expansion investment from the UK adds about plans in Poland according to UK-based PLN 15bn to Poland’s GDP, which is companies covered by the survey. On attributable to the inflow of knowledge, the other hand, the unpredictable technologies and capital. lawmaking (82% of all responses) and the tax wedge (73%) were the factors UK-owned businesses have plans to most frequently identified by them as expand their presence in Poland, mainly hindering business. through new investments and hiring.
55 Sustainable development – best practice and the most promising areas of partnership
Introduction
The private sector’s commitment to In Poland, according to the The SDGs have replaced the earlier Sustainable Development Goals (SDGs) Deloitte 2019 HR Trends survey, 32% UN Millennium Development Goals brings value to society at large and to of HR leaders, but also IT leaders and (MDGs), established by a rather narrow the natural environment, but also to executive staff, believe that corporate group of experts largely for developing enterprises involved in the process. As social responsibility has moved up countries. Building on the unsuccessful regards sustainability, stakeholders’ their list of priorities compared with MDG initiative, the process of setting expectations are growing, especially a year earlier, and 42% expect it to new Sustainable Development Goals those of employees and consumers: gain further in importance over the was much more inclusive, with targets as many as 62% of the UK workforce next three years. Responding to defined both for developed and expect their employers to be guided social needs and expectations voiced developing countries. The developing by a ‘greater purpose’ and their by their employees, enterprises countries’ success in their progress job to have a ‘meaningful societal can now demonstrate how their towards the SDGs is therefore closely impact’. 79% of respondents agree businesses fit in with the universal linked to that of developed countries, that companies ‘should take the lead and recognisable 2030 Agenda which include both Poland and the on change rather than waiting for for Sustainable Development and UK (despite their obvious economic government to impose it’ (up 11pp its 17 Sustainable Development Goals differences37). on 2018). (SDGs).
56 Sustainable development – best practice and the most promising areas of partnership
The role of businesses in driving Sustainable Development Goals
The holistic approach behind the companies, respectively) exceed SDGs makes for much heavier the GDP levels of some EU member organisational and financial demands states, such as the Czech Republic and they place on a country compared Portugal. Various business externalities, with the MDGs; therefore, they can both positive and negative, can often never be attained without the private produce a greater impact than many sector’s involvement and access to its third-sector organisations, focusing capital. directly on a specific SDG. Therefore, the private sector must get involved in Successful delivery of the SDGs is the pursuit of Sustainable Development a major challenge, yet also a great Goals for the initiative to be successful. opportunity for both economies In contrast, a passive approach to SDGs and societies. Climate change, air may adversely affect the sector itself. pollution, sustainable production and consumption, green energy, The natural environment, a home eradicating poverty and promoting to us all, is on the verge of a major equal opportunities are just some areas crisis. Scientists involved in their where the exchange of knowledge study are raising the alarm that some and best practice is requisite to tackle of the planetary boundaries have existing problems as effectively as already been crossed. Thousands of possible. Full attainment of the SDGs them have therefore issued the World would require annual spending of the Scientists’ Warning to Humanity: A Second order of USD 5-7 trillion, which is the Notice, following the first such appeal entire GDP of Japan (the world’s third- published in 1992. Unfortunately, ranking economy). It is an enormous within the span of 25 years, only one effort calling for global cooperation out of the nine pinpointed challenges and the involvement of business, has been successfully addressed which has a special role to play given – namely, the ozone hole. It was by its organisational and financial capital no means an easy task, requiring combined with decision-making a joint effort by governments and powers, which often go beyond the corporations to enforce the necessary potential of national economies. For regulatory framework and revamp example, annual revenues of the UK’s existing technologies. In the face of two corporate giants Royal Dutch Shell the unfolding climate change, such and The British Petroleum Company transnational partnership is again plc (BP) (the EU’s first and third largest prerequisite.
57 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 36. Planetary ecosystem variables – global trends over time in 1960–2016
Ozone depletors Freshwater resources Reconstructed marine catch (Mt CFC-11 equivalent per year) per capita (1000 m3) (Mt per year) 1.5 130
12 1.2 110
10 0.9 90
0.6 8 70
0.3 6 50 1960 1992 2016 1960 1992 2016 1960 1992 2016
Dead zones (number Total forests Vertebrate species abundance of affected regions) (billion ha) (% of 1970) 100 600 4.10 80 400 4.05 60 200
4.00 40 1960 1992 2016 1960 1992 2016 1960 1992 2016
CO emissions Population 2 Temperature change (°C) (Gt CO2 per year) (billion individuals) 1.00 7 30 0.75 6 Humans 5 0.50 Ruminant 20 4 livestock 0.25 3 10 0.00
1960 1992 2016 1960 1992 2016 1960 1992 2016
Source: Alliance of World Scientists
Climate change is a global phenomenon destructive impact concern the natural based on declarations of the Paris and entails primarily global risks. environment and are related to climate agreement signatories, will lead to The most pressing of them were change. Their likelihood is even greater global warming by 3°C (instead of identified in The Global Risks Report 2019 if we consider that the most recent the 1.5°C recommended by scientists). published by the World Economic Intergovernmental Panel on Climate The resulting difference multiplies the Forum. The scenarios most likely to Change (IPCC) report suggests that likelihood of global risks becoming materialise with the potentially most the GHG emission reduction pathway, a reality.
58 Sustainable development – best practice and the most promising areas of partnership
Figure 37. Global Risks Report 2019: Top risks in terms of likelihood and impact
Failure of climate- change mitigation and adaptation
Ekstreme weather Water crises events Natural disasters
Cyberattacks
Biodiversity loss and Impact ecosystem collapse
Man-made environmental disasters
Interstate conflict
Large-scale involuntary migration
Likelihood
Source: World Economic Forum
Against this backdrop, the towards SDGs to prove successful, systemic problems. On the contrary, indispensable risk management will an essential question must first be a company’s CSR maturity involves require cooperation across all levels – asked: which SDGs an organisation a shift away from spontaneous actions bringing together governments, local is most likely to advance, given the towards a more systemic model, authorities, businesses, the third sector specific nature of its business? We focusing on positive environmental and and individuals. As regards the business must also remember that no one-off social impacts to be achieved through sector, it order for its efforts in working CSR initiatives will cure higher-level its key business activities.
59 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Key areas of focus and needs in accelerating the delivery of SDGs in Poland
The key EU-level SDGs (identified in the IV. Ensuring a socially fair transition Reflection Paper Towards a Sustainable No unfair change can gain social Europe by 2030) cover four areas, in acceptance. Energy transition is which the private sector is a major a good example, as it must have actor: regard to the needs of less well-to- do people, who commonly face the I. From linear to circular economy problem of energy poverty. In 2016, The 2015 Circular Economy it affected an estimated 12.2% Action Plan and the European Of the Polish population (the Strategy for Plastics in a Circular percentage for the entire EU being Economy are expected to be largely similar). gaining in importance. By 2030, all plastic packaging placed on The bilateral cooperation in sustainable the EU market must be reusable development should reflect the global or profitably recyclable, while the and regional considerations, but also Single-Use Plastic Directive will the strengths of both economies. In ban all disposable plastic products last year’s SDG Index report, the UK from the market as of 2021, ranked 14th while Poland came in 32nd. Incidentally leading to the creation The widest gap between the two of 200,000 new jobs across Europe. countries was noted in the delivery of the following SDGs: Industry, innovation II. Sustainability from farm to fork and infrastructure (Goal 9), Reduced Organic farming currently accounts inequalities (Goal 10), Life below for 6.7% of all agricultural area water (Goal 14) and Clean water and in the European Union, but the sanitation (Goal 6), in which the UK has sector is on a fast upward trend. a strong performance record. In 2012–2016, the organically farmed acreage within the EU increased by nearly 20%.
III. Future-proof energy, buildings and mobility The objective of improving energy efficiency and the share of RES in the overall energy mix while bringing down GHG emissions remains a top priority for the European Union. In the 2020 budget proposed by the European Commission, as much as 21% of all funds have been committed to tackle climate change – this being currently the single largest slice of the budgetary cake.
60 Sustainable development – best practice and the most promising areas of partnership
Sustainable development potential for Poland and the UK within the SDG framework
The EU’s sustainable development The sustainable development potential priorities largely coincide with the in the key identified areas is still so-called sustainability accelerators being explored (especially by the defined for Poland. Deloitte’s private sector). Deloitte’s research expert report for the Ministry of commissioned by the UK government Development (currently the Ministry has shown the public sector companies of Entrepreneurship and Technology) to be at the leading edge of work identified the key sustainability towards the SDGs, as most of them accelerators for all SDGs. These include: have declared commitment to SDGs •• Organic farming and R&D in and 49% have already begun to agriculture (SDG 2). integrate SDGs into their business •• Healthcare spending (SDG 3). agendas. The private sector, on the •• Renewable energy sources and other hand, is only halfway through energy efficiency (SDG 7). exploring how it can contribute to the •• Energy and resource achievement of SDGs, with only 6% efficiency (SDG 12). of private businesses recognised as •• Trade with developing sustainability champions (vs 24% of countries (SDG 17). state-owned companies).
The UK has identified the following key However, the need to embed SDGs into areas in its Voluntary National Review the business missions and operations of progress towards the Sustainable is increasingly coming to the fore. Development Goals (2019): According to the CSR Europe White •• Further increasing efforts to address Paper 2019, the SDGs receiving climate and environmental issues. the most attention and requiring •• Ensuring the housing market works most urgent action are: Climate for everybody. action – 63% (SDG 13), Responsible •• Responding to mental health needs. consumption and production •• Supporting a growing and ageing – 28% (SDG 12), as well as Peace, population. justice and strong institutions •• Continuing to tackle injustice to – 21% (SDG 16). ensure no one is left behind.
61 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Figure 38. Key SDGs according to businesses
Climate Action
Responsible Consumption and Production
Decent Work and Economic Growth
Innowacyjność, przemysł i infrastruktura
Quality Education
Partnerships for the Goals
Gender Equality
Sustainable Cities and Communities
Good Helath and Well-Being
Life on Land
Peace, Justice and Strong Institutions
Affordable and Clean Energy
Reduced Inequalities
Clean Water and Sanitation
Zero Hunger
No Poverty
Life Below Water
Requires most urgent action Receives the most attention
Source: GlobeScan/SustainAbility, 2019
62 Sustainable development – best practice and the most promising areas of partnership
Energy transition to drive down the energy sector’s CO2 In the first half of 2019, the zero- emissions by an impressive 59.6%. carbon electricity generation in the UK Today, more than 19% of the country’s surpassed that from fossil fuels (coal, electric power comes from wind (up gas and oil) (Goals 7, 12 and 13). The from barely 1% in 2009), while coal- shift has been driven by the country’s based energy generation has fallen priority programme of achieving over that period from 30% to 3%. climate neutrality (with zero net GHG The ongoing energy transition has emissions), while enhancing energy involved virtually no price rises for security by rebalancing the generation households: as fossil fuel imports mix away from coal (in 2013–2017, coal have been reduced with a concurrent imports went down 78%). On the back improvement in energy security and of its efforts to develop offshore wind mitigation of CO2 emissions, the UK power and solar (PV) energy sources has managed to avoid the need to pass and reduce the share of coal in the through to consumers the rising prices energy mix, while looking for gains in of ETS certificates (which have spiralled energy efficiency, the UK has managed up nearly 78.8% over the past year).
Figure 39. UK energy production by source
100 Biomass 5%
Zero-carbon 48% 75
Import split between 50 carbon and zero-carbon
25 Carbon 47%
0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Renewables Nuclear Coal Gas Other
Source: Deloitte based on National Grid
63 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
The UK experience can be particularly road, but has considerable potential useful for Poland, whose offshore wind offered by the relatively large area of potential is estimated at 10.3 GW (of shallow coastal waters. The United installed capacity). Harnessing that Kingdom, on the other hand, with its potential is an objective set out in the institutional know-how and ability to Energy Policy for Poland until 2040. The supply relevant equipment and services, UK is already Europe’s leading offshore could assist Poland in leveraging its wind power producer (with an annual offshore wind power potential and, in output of 8 GW), aiming at a target a wider sense, transforming its energy generation volume of 30 GW by 2030. generation system. Poland is just at the beginning of that
Review of good practices in Polish-British relations
British companies operating in environment and society. The following Poland become involved in a number initiatives have been assigned to the of initiatives and projects, which in relevant SDGs, with an overview of the addition to boosting the economy, project rationale, impact and specific are also designed to benefit the effects.
64 Sustainable development – best practice and the most promising areas of partnership
Arriva Improving access to public transport
Why?
Transport is a region’s bloodstream. A well-organised public transport system will drive societal development, eliminate white spots and make the region more attractive for tourists. Arriva takes a number of measures to improve access to public transport and tackle transport exclusion.
How? PLN 1 token fare for a train ride •• Restoring traffic on closed railway lines.Restoring connections between Aleksandrów Kujawski and Ciechocinek for the holiday season. Under the project, four pairs of trains ran daily during the holiday season, for a token fare of PLN 1. As a result, Arriva doubled its ticket revenue, donating it to charity.
•• New rail connections launched in cooperation with the Pomeranian Society of Railway Enthusiasts and local authorities. Additional connections between Grudziądz and Stegna, and along the Grudziądz – Malbork – Elbląg – Tolkmicko, Frombork – Braniewo route.
•• Launch of long-haul railway connections. A seasonal connection between Hel and Bydgoszcz made it possible for 225,000 passengers to reach the seaside using a low-emission mode of transport.
•• Bike & Ride project in Świekatowo. Bicycle parking space with 40 racks.
Effects
Nearly 265,000 people were able to reach the seaside or health resorts by rail, or simply take their first ever train ride. Not only did the initiative provide new transport opportunities for local residents and tourists, but
helped reduce CO2 emissions (compared with private transport).
65 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Arriva Building a safety culture in transport
Why?
Safety first! As a responsible train and bus operator, Arriva takes a number of measures to build and promote a safety culture both within its organisation and the local communities covered by its services. 25% How? reduction in the number of In terms of the internal safety culture, Arriva goes beyond mere compliance accidents at work with standards prescribed by applicable Polish laws by:
•• Adopting minimum-level health and safety requirements, which set out key OHS guidelines based on the UK experience.
•• Leadership Safety Tour (LST). Following the UK’s good practice in transport business, Arriva adopted an LST system of management visits at every single location where we operate (workshops, offices, stations, yards, warehouses, vehicles), with a particular focus on safety. All directors, managers and leaders are required to make 2 to 4 such tours per year.
•• Driver Monitoring. Including regular checks of sobriety, validity and possession of driving licences, tachograph readings, medical check-ups, and drivers’ behaviour (driving style, economical driving, quality of passenger service, etc.).
•• Testing of emergency procedures through regular drills in collaboration with relevant services (police, fire and medical emergency services). The following scenarios have already been simulated: a train and bus collision following a terrorist attack, chemical contamination on board a train, as well as a fire and chemical bomb planting at a bus station. After each emergency drill, it is discussed with the services, lessons learned are defined, and follow-up actions taken to make the emergency procedures more effective.
•• Educating children and young people on safety and proper behaviour when travelling by bus or train.
Effects
A 25% reduction in the number of accidents at work in 2018 vs 2017, a 37% drop in the number of vehicle collisions and accidents over the same period, as well as improved awareness of transport risks and proper behaviour at level crossings.
66 Sustainable development – best practice and the most promising areas of partnership
Aviva Air pollution education and monitoring
Why?
36 out of 50 EU cities with the highest air pollution levels are located in Poland. To address the problem, Aviva launched the ‘I know the air I breathe’ awareness campaign in the autumn of 2017, focused mainly on the harmful effects of smog and health protection during periods of poor air quality.
How? 400 additional air quality sensors installed In partnership with the Airly start-up, Aviva extended the Polish air monitoring network by adding several hundred new sensors. To this end, two editions of a competition for local communities were held by the Aviva Foundation, with strong involvement from local authorities and schools. Aviva also partnered with experts and influencers to disseminate attractive materials raising smog pollution awareness among various social groups. In the second edition of the campaign (autumn and winter of 2018), the company co-funded free lung tests as part of the Spirometry Days, organised Poland’s first ever running event for runners wearing AirRun anti-smog masks in Kraków, and contributed to the putting up of Poland’s first anti- smog billboard in the centre of Warsaw.
Effects
400 additional air quality sensors installed throughout the country, mostly for local communities under the Aviva Foundation’s competition, with about 150 devices installed on the company premises. 50 primary schools that had taken part in the competition also received their own air quality sensors. Wide coverage of educational materials posted on the wiemczymoddycham.pl website and in social media. One thousand participants in the AirRun event in Kraków – Poland’s very first run in anti-smog masks.
67 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Aviva Free educational meetups on innovation and new technologies
Why?
Since 2015, Aviva has supported professionals and those interested in developing new technologies and innovations. Its Warsaw-based office hosts people with passion who want to develop and share their experience with others. 4,000 How? participants of organised meetups and workshops In 2018, Aviva organised 69 free meetups and workshops attended by more than four thousand participants, who had the opportunity to broaden their knowledge of IT & Digital, acquire new skills, discuss and network. The networked communities continue to meet at Aviva’s office, building a forum for the exchange of technical and practical experience. Their guests have included representatives of Agile Warsaw, Automate NOW! Warsaw, AWS Polska, AWS User Group Poland, Future Design, Geek Girls Carrots, meet.js Warsaw, Pint with Oracle Users Group, Public Cloud User Group, Serverless User Group Poland, and Social Media Po Godzinach.
Effects
In 2018: 69 meetups with a turnout of over four thousand, having networked a unique community interested in the development of new technologies and their applications, this education and experience- sharing opportunity advertised widely through social media.
68 Sustainable development – best practice and the most promising areas of partnership
LUX MED Group Medical partnership for athletes and para-athletes
Why?
There being a close link between health and sports, the pursuit of this SDG is a natural path for the LUX MED Group. Committed to longer, healthier and happier lives of patients, the Group provides comprehensive professional healthcare – from disease prevention, through vaccination and medical imaging, to treatment – to both professional and amateur athletes.
How? 3,159 performed medical procedures The LUX MED Group is the main medical partner of the Polish Olympic and Paralympic Committees. In addition to its partnership with the entire Olympic movement, it provides medical support to selected sports associations and engages in the activities of organisations promoting Olympic values and spreading the sporting spirit. The LUX MED Group is also a partner of the ‘We Play Fair, We Say #NO!to Doping’ campaign, run by the Polish Anti-Doping Agency under the honorary patronage of the Polish Olympic Committee to combat doping in both professional and amateur sports. It also runs two programmes in prophylactic sports medicine: ‘Medicine for Sports and Active People’, dedicated to those who want to start an active lifestyle or continue such lifestyle in a more deliberate way, and ‘Healthy - Ready - Sport!’, the objective of which is to remind sportspeople of the need for regular health check-ups, critical to safe practising of sports.
The Group has also been developing a countrywide network of sports medicine clinics, one of them – the LUX MED Group’s Carolina Medical Center – having been awarded the prestigious FIFA Medical Clinic of Excellence title.In addition, the LUX MED Group regularly provides medical support services during sports events, including the Warsaw Running Triad.
Effects
By 2019, LUX MED has performed medical procedures for 3,159 athletes associated with the Polish Olympic and Paralympic Committees and 35 sports associations.
69 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
LUX MED Group First aid education campaign
Why?
The LUX MED Group consistently combines the sustainability concept with the sharing of knowledge. Its comprehensive CSR strategy is complemented by surveys into the needs of local communities, which show that some young people are afraid of giving first aid due mainly to lack of knowledge and concern for their own and the injured person’s safety.
How? 5,000 students have participated in the ‘I know how to help’ is an education campaign in which qualified instructors of the LUX MED first aid campain Rescue Academy with many years of experience teach children and young people how to perform a CPR procedure, show them what to do in case of convulsions or choking, and demonstrate how to use an Automated External Defibrillator (AED). Instruction is given in the form of lectures and workshops, with the idea to provide children with some concrete knowledge, but also to develop their empathy and instil in them the conviction of the need to react whenever someone needs help. For more information on the ‘I know how to help’ campaign, see www.umiempomoc.pl. Another education initiative is the free First Aid application for witnesses of accidents and other emergencies, containing a number of valuable tips and illustrations to help administer first aid to casualties.
Effects
The ‘I know how to help’ first aid education campaign has been run since 2011, in eight editions, with more than five thousand pupils and students from Warsaw, Kraków, Katowice, Wrocław, Gdańsk, Sopot, Gdynia, Poznań, Toruń, Rzeszów and Olsztyn having participated to date. The First Aid application has been downloaded to mobile devices over a million times.
70 Sustainable development – best practice and the most promising areas of partnership
BP Creating new social behaviours and an intermediation mechanism
Why?
Poverty and social exclusion are experienced by eight million Poles, the number of Polish people living in extreme poverty equalling the entire population of Warsaw. The WIOSNA Association has created an intermediation mechanism through which benefactors and volunteers can share with those in need.
How? 15,000 community of volunteers Connecting the needy with those who want to help, reaching the poorest families in Poland with aid in the form of Christmas gifts. Since 2008, BP in Poland has provided financial, volunteering and expert support for all projects pursued by the WIOSNA Association, having engaged its employees in the ‘Noble Gift’ initiative. Additionally, in partnership with the WIOSNA Association, it has run a series of marketing and PR initiatives, such as the ‘0:3 at half-time’ advertising campaign, and was involved in the production of the ‘Noble Gift Chronicle’ television programmes, bringing home to Poles the idea of wise help and presenting famous sportspeople’s ways of struggling with their own weaknesses and adversities. One third of the proceeds from sales of BP Supercard, the company’s newly marketed product, was donated to support the ‘Noble Gift’ initiative. Academy of the Future is a project designed to provide children who do poorly at school with weekly educational and motivational activities. They receive individual support from qualified tutors – volunteers who, by helping them with learning issues, restore the children’s self-confidence and empower them to overcome barriers such as poverty, apathy, family conflicts or rejection by peers. Volunteers share their knowledge, experience and hobbies, while taking care to ensure that the children have a chance to experience their own educational success.
Effects
Every year, BP helps bring together hundreds of thousands of benefactors, volunteers, families and children in need. The ‘Noble Gift’ community comprises 15,000 volunteers and nearly a million benefactors. Additionally, over 2,000 volunteers of the Academy of the Future project working in 255 local teams across Poland provide assistance to 2,300 children; so far, the volunteers and children from more than 200 schools have worked together for over 90,000 hours. Working with a tutor and building an individual relationship is a completely new approach to lending support. In 2009, BP was awarded its third ‘Benefactor of the Year’ title in the ‘partnership with an NGO’ category for its projects run jointly with the WIOSNA Association.
71 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
BP Working with third-sector organisations
Why?
Social responsibility initiatives are good for the corporate image, translating into a business advantage, but also help build a business culture, while bettering society. Responsibility increases with each złoty invested.
How? PLN 40m has been spent on CSR projects BP has partnered with organisations which value effective cooperation: the Polish Humanitarian Action (PAH), the WIOSNA Association, the SIEMACHA Association, the St Lazarus Hospice, and the Tatra Volunteer Search and Rescue (TOPR) (all under a PAYBACK scheme), as well as R2 – paramedics on motorcycles and the Women’s Class Foundation, supporting women aged 50 or more in returning to the labour market. The company supports the following projects run by these organisations: ‘Pajacyk’ (Jumping Jack) – providing food to undernourished children in Poland and abroad, ‘Noble Gift’ – helping families at Christmas and throughout the year, ‘Academy of the Future’ – helping children with learning difficulties, ‘Pola Nadziei’ (Fields of Hope) – supporting hospices, SIEMACHA – education and peer education, TOPR – mountain rescue.
Effects
Since 1996, BP has spent more than PLN 40m on CSR projects carried out in Poland, having made a significant contribution to the following organisations and programmes: Fields of Hope (from one hospice in the Kraków district of Nowa Huta to 50 such facilities across the country); Siemacha (from 10 to 35 locations); Noble Gift (from 30 to 20,000 families that have received aid); Academy of the Future (from 20 to 2,300 children working with individual tutors); TOPR (63,000 people provided with assistance in the mountains); Jumping Jack (ten million meals given out to more than 66,700 children). BP has received a number of awards and distinctions for its commitment, including three ‘Benefactor of the Year’ statuettes and a Golden CSR Leaf. In 2018, BP in Poland became a CSR Symbol, having been awarded this prestigious title for its corporate social performance.
72 Sustainable development – best practice and the most promising areas of partnership
Sage Education of SMEs and of accounting, finance, HR, payroll and regulatory compliance professionals
Why?
Business activity requires that increasingly complex regulations are translated into everyday practice. Information materials prepared by the lawmakers themselves are insufficient for business owners and professionals to keep abreast of a number of regulatory changes, especially those related to digital technologies.
How? UCF Uniform Control File Education and information campaigns on changes in commercial, tax and labour laws. Sage’s first major information campaign was designed to prepare Polish businesses for the introduction of the Uniform Control File (UCF) reporting, a turning point in making taxes digital. It was followed by other campaigns focused on new requirements in the exchange of electronic documents between businesses and public administration and between businesses and employees, corporate financial reporting and data processing.
Effects
Sage’s education and information campaigns are often among the first sources of practical knowledge for business entities, while materials prepared by Sage are also used by representatives of the public administration.
73 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Sage Running a foundation
Why?
Activities of the Sage Foundation are based around involvement in local community life, which is supported by the company with its time, funding and technologies.
How? 83% of all employees were involved in Volunteering is realised in practice through the 2+2+2 concept: up to 2% of Sage employees’ volunteering working time is devoted annually to charitable and community activities (5 additional fully- paid leave days per employee), up to 2% of free cash generated in the previous financial year is allocated to support community projects proposed by Sage employees and charitable donations, and at least 2 Sage software licences are donated to selected charities or community organisations.
Support is mostly extended to employee projects that seek to promote such ideas as entrepreneurship, equal opportunities (especially for young people and women), teamwork, sustainable development, and education.
Effects
In FY 2018, Sage employees in Poland spent 291 working days on community work. Statistically, close to 83% of all employees were involved in volunteering for at least one day. Every year, the number of volunteering days rises (statistically) at a double-digit rate. In addition, employee involvement in specific group projects translates into financial support from the Sage Foundation.
Globally, the Foundation has partnered with more than a thousand organisations, over a dozen in Poland alone.
74 Sustainable development – best practice and the most promising areas of partnership
Provident Building a responsible consumer lending sector
Why?
Responsible lending is the cornerstone of Provident’s business strategy, while remaining the company’s key sustainable development objective. Therefore, this practice involves both internal activities, having a real effect on corporate governance and implementation at the company of responsible business processes, as well as external self-regulation and education.
First How? and the only company with a RESPECT Inspired by Provident, a Financial Market Development Foundation was established in 2015, Certificate with a mission to promote sustainability and the highest ethical standards in the financial sector, while enhancing consumer security. The Foundation is an active partner in the development of financial market self-regulation, having co-authored the ‘Good Practices of Consumer Loan Advertising’ and becoming a signatory to the Advertising Code of Ethics.
Effects
Provident has a long track record of awards for its ethics and sustainability efforts. For example, it has been recognised with Golden CSR Leaves by the Polityka weekly and the Ethical Business title by the Puls Biznesu magazine. Additionally, it has been ranked high in the DGP Ranking of Responsible Companies. In 2018, Provident Polska was the first and so far the only company from outside the WSE main list honoured by the Warsaw Stock Exchange with a RESPECT Certificate, attesting to the company’s responsible governance, environmental and social practices.
75 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Provident Employee volunteering
Why?
Provident’s business activity is strongly rooted in its local communities, of which both the company’s customers and customer service advisors are members. It is important that local communities, just like mature European economies, make up strong and coherent organisms, developing at a healthy pace.
How? PLN 2m total cost of volunteering Provident’s ‘Yes, I do help’ (Tak, pomagam) programme is a grant competition, with volunteers campaigns submitting their proposed projects and an independent judging panel selecting the best ones to grant funding to. Thanks to Provident employees’ commitment, the initiative has grown into one of Poland’s largest employee volunteering schemes. In 2017 the company expanded its activities by linking up with the Zaczytani Foundation, and since 2018 has been additionally involved as a mentor in community projects implemented by young people having partnered with ‘Exempt from Theory’ (Zwolnieni z Teorii), Poland’s largest youth volunteering platform.
Effects
26 programme editions (two per year) have been run since 2006. 30% of the 1,500 Provident Polska employees are active volunteers. Nearly 700 volunteering campaigns have been carried out at a total cost of over PLN 2m. More than 17,000 books have been collected under a joint project with the Zaczytani Foundation, and Provider’s volunteers have been actively involved in a fairy-tale therapy project for little patients for 2 years now. In association with the ‘Exempt from Theory’ platform, the company’s mentors have supported 33 participants, who have implemented 18 ideas.
76 Sustainable development – best practice and the most promising areas of partnership
Tesco Fight against food waste
Why?
Tesco’s ambition is to ensure that no food fit for consumption is wasted at Tesco stores. The company has committed to donate all the unsold food from its stores to charity by 2020.
How? 41% drop of the extent of food wastage Since 2013, Tesco and the Federation of Polish Food Banks have joined efforts to combat food waste in Poland. Believing that ‘what gets measured gets managed’, Tesco is the only retail chain publishing reports that reflect the scale of food waste. The balance shows what has been achieved and the areas for improvement, setting new tasks for the industry as a whole. The results help formulate clear objectives and actions that directly contribute to reducing the amount of discarded food, with proper planning of deliveries, selling goods close to expiry at discounted prices, introducing the ‘Perfectly, imperfect’ product ranges, and giving edible food surplus to local charities. The food surplus donation process is facilitated by the FoodCloud application, launched in 2018 to monitor and manage the collection of unsold food. Since 2019, food products such as fruit, vegetables, meat and bread no longer fit for human consumption but suitable for animals can also be collected by animal welfare organisations.
Effects
Since 2016/2017, the extent of food wastage at Tesco stores has decreased 41%, and in 2018 the chain handed out 3,411 tonnes of food, more than twice the amount distributed in 2016/2017, with over 250 Polish stores regularly participating in the process.
77 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Tesco Support for the company’s immediate environment
Why?
The primary purpose of the project is to support local communities in their efforts to benefit the immediate environment. With grants from Tesco, NGOs, local activists and informal groups are able to implement projects engaging local residents to make a positive difference.
How? PLN 5m total grants for local community initiatives ‘You decide, we help’ (Decydujesz, pomagamy) is a programme through which financial support is funnelled to local communities for projects designed to benefit their immediate environment. For these purposes, the map of Poland was divided into 125 microregions around Tesco stores. In the first stage, projects can be submitted via an online platform available at www.tesco.pl/pomagamy. Subsequently, all projects are evaluated by the grant committee for their merits, chances of success and potential to bring about a lasting change. The final decision is with Tesco shoppers, who vote to choose projects they think are most needed in their regions. The most interesting initiatives in each microregion receive grants of PLN 5,000, 3,000 or 1,000.
Effects
Over the three years since the programme was launched, financial support has gone to 1,565 community projects selected by Tesco shoppers, who have cast a total of 32,000,606 votes. Throughout its six editions, citizen activists have received PLN 5,575,000 for their local community initiatives.
78 Sustainable development – best practice and the most promising areas of partnership
Diageo Minimising negative externalities Why?
The company’s mission statement is: ‘Celebrating life, every day, everywhere’. It involves investing time in customer relations to understand customer needs, while promoting responsible consumption and sale of alcoholic beverages.
How? 4m people daily campaign Initiatives presented below have been carried out as part of a CSR campaign launched reach in 2010: ‘Alcohol is responsibility. Drink responsibly’ (Alkohol to odpowiedzialność. Pij rozważnie). The campaign partners have included UNGC, the Automotive Market Research Institute, SAMAR, the Krzyś Foundation, the Medical University of Warsaw, the Polish Students’ Association, the General Police Headquarters, as well as Poland’s major retail chains and owners of medium-sized and small shops.
Consumer dialogue has been supported by websites such as pijrozwaznie.pl, www.drinkiq.com/pl, and Facebook/ pijrozwaznie, offering knowledge and guidance on responsible drinking and sale of alcohol and providing e-learning opportunities on the effects of alcohol on the human body and its responsible consumption.
Stay yourself. #StayYourself is an initiative aiming to educate mainly young people on responsible alcohol consumption. Bloggers and internet users were invited to join in by showing their own ways of ‘staying themselves’ at parties in the form of graphics, photos or short videos. Materials delivered by the campaign were used for extensive online promotion of a responsible approach to alcohol drinking.
European Night Without Accident. An annual initiative organised by Diageo since 2012 (together with the Krzyś Foundation) to reach out to the widest possible young audience and, as a result, reduce the number of drunk road users and raise awareness of the risks associated with drunk driving.
The company’s engagement is broader in the Polish spirits industry, where it works with key market participants and regulators, chairing the CSR Committee of the Association of the Polish Spirits Industry Employers.
Effects
The message conveyed by last year’s edition of the campaign was visible at 3,000 retail outlets, visited by 4 million consumers daily. Awards for Diageo’s efforts include the titles of Responsible Business Leader, Ethical Company and Great Place to Work, and recognition of the ‘Alcohol is Responsibility. Drink responsibly’ campaign as an example of good practice by the Responsible Business Forum.
79 Economic relations between Poland and the United Kingdom – an exceptional and enduring partnership
Summary
Through their daily activities, affordable and clean energy (SDG 7), investments and contribution to climate action (SDG 13), and innovation, Poland’s GDP, UK-based companies industry, and infrastructure (SDG 9). have an effect on the Polish economy. Implementation of SDG 9 has already However, their influence extends begun with a memorandum of beyond driving economic growth, understanding signed in early July within raising the overall quality of people’s the framework of the Ministry of Digital lives through the pursuit of specific Affairs’ Common IT Infrastructure of the SDGs. State Programme. The memorandum provides for transplanting to Poland of Based on the best practices discussed the UK’s Digital MarketPlace, which is above, the goals typically advanced to help our country build its own cloud by these organisations include good computing solution and standardise IT health and well-being (SDG 3), quality services across public administration education (SDG 4), sustainable cities relying on ready-to-use applications and communities (SDG 11), responsible based on UK models. This is just an consumption and production (SDG 12) example of how the two countries can and partnerships for the goals (SDG 17). establish cooperative links to advance progress towards the SDGs. Other The existing efforts could be opportunities and key Agenda 2030 augmented by sustainability accelerator areas have come to light based on areas and activities arising from overview of key documents adopted pan-European trends. This would by Poland, the United Kingdom and the entail a focus on the following SDGs: European Union.
80 Sustainable development – best practice and the most promising areas of partnership
The graphic below presents the SDGs matrix with the most frequently achieved goals marked (based on case studies of the analyzed companies) and development goals that result from pointing to them as priority for at least two documents (PL, UK, EU).
Focal goals Sustainability Accelerators (PL)
Development goals Towards a Sustainable Europe by 2030 (UE)
From urgency to action: Business and the SDGs (UE)
National Review of progress towards the Sustainable Development Goals (UK)
81 Conclusions
Poland’s economy has remained on Strong potential for their further an uninterrupted growth path ever development stems from a number since 1991, which is a record among of factors. Firstly, Poland has long European Union countries. As positively been one of the top growth countries demonstrated by economic data and in Europe, but it still lags behind the analysis, investment, including the richest economies, for instance in terms inflow of foreign capital, has been one of labour productivity. Secondly, the of the key drivers of Poland’s growth economies of Poland and the United over that period. Obviously, the influx Kingdom are quite varied, meaning they of almost PLN 50bn of UK money in have unique advantages to offer to direct investment and the growth in each other. This applies to both trade in bilateral trade by over 500% since 1995 goods and services and to capital flows. have been possible on the back of bold Thirdly, opportunities for tightening and far-reaching reforms introduced cooperation could and should be in Poland after 1989, but credit should sought in global challenges such as also go to the United Kingdom’s climate change, pollution, or pressure competitive economy, one of global on natural resources. trade leaders and an important financial hub since the dawn of capitalism. UK-owned companies active in Poland demonstrate that sustainable Poland’s accession to the European development can go hand in hand Union provided another major impulse with the development of a competitive for strengthening the ties between business, and that a strong customer Poland and United Kingdom. Although focus can be achieved without losing the two countries are not neighbours, sight of the needs and concerns of the level of their economic relations a wider community. These aspects are is much higher than what could very important, as Poland still needs to be expected looking at the size of attract new investment and its existing their respective economies or their businesses need to develop, especially geographical distance. The same holds those that help sustain GDP growth true for political relations down to the while making a positive difference interpersonal level of ordinary human for society and the environment. interaction. Over 800,000 Poles living The energy transformation, water in the UK, 115,000 Polish employees management, a circular economy working for UK- owned companies and concept and turning the public sector PLN 15bn contributed by UK investment digital are just some of the challenges to Poland’s GDP – are what forms which also present enormous business a real, solid foundation warranting opportunities that can drive forward an optimistic outlook on the future the relations between Poland and the relations between the two countries. United Kingdom in the years to come.
82 Annex – underlaying methodology
A panel gravity model of Poland’s foreign trade in 1995–2018
Estimation Relative error (%) 4,169 Number of observations Pr. of GDP 0.873*** 2.18
EU 0.221*** 34.8 185 Number of countries United Kingdom 3.646*** 8.67
Constant 7.250 *** 3.67 0.9274 Adj. R-squared
The explained variable is a natural logarithm of trade in goods estimated for 182 countries, but for the sake of clarity only between Poland and a trade partner country at constant the estimate for the United Kingdom is shown above. The prices (USD, 2012) in the year concerned. The explanatory constant can be interpreted as a fixed effect for Aruba, variable Pr. of GDP is a natural logarithm of the product of which has been omitted in binary individual fixed effects, as Poland’s GDP and that of Poland’s trade partner at constant it results from the mathematical requirements of the model. prices (USD, 2012), EU is a dummy equalling 1 if both Poland The asterisks denote statistical significance at standard and the trade partner are EU members in the year concerned, confidence levels (* – 90%, ** – 95%, *** – 99%). The model and otherwise 0. UK is a fixed effect for Poland’s trade with has been estimated using the ordinary least squares (OLS) the United Kingdom in 1995–2018. Fixed effects have been method.
Source: Deloitte.
83 List of figures
Figure 1. Poland’s GDP per capita in relation to Great Britain’s GDP per capita (UK’s GDP per capita = 100%) 14 Figure 2. Investment attractiveness ranking according to a survey by the Polish-German Chamber of Commerce and Industry – 2019 vs 2018 16 Figure 3. Exports from Poland to the UK in 2017 (USD billion) 17 Figure 4. Poland’s exports to the United Kingdom Structure of exports in 2017, by product 17 Figure 4. Imports to Poland from the UK in 2017 (USD billion) 18 Figure 6. Poland’s imports from the United Kingdom Structure of imports in 2017, by product 18 Figure 7. Exports from Poland to the UK 20 Figure 8. Value of trade in services in 2017, by major importers and exporters of servicesfrom/to Poland (USD thousand) 21 Figure 9. Value of FDI in Poland and the UK (as % of GDP of the host country) 21 Figure 10. Trade between Poland and a given country depending on the size of both economies in 2018 25 Figure 11. Growth in Poland’s trade with the UK in 1995–2018 – actual vs estimated by the model (%) 26 Figure 12. Growth in Poland’s trade with the largest EU member states in 1995–2018 (%) 26 Figure 13. Trade flows between Poland and the UK in 1995–2018 – predicted by the econometric model vs actual (values for 1995 = 100) 27 Figure 14. Real effective exchange rates (REER) for selected European countries in 2000–2013 28 Figure 15. Real effective exchange rates (REER) for selected European countries in 2000–2013 28 Figure 16. Trade in services between Poland and a given country depending on the size of both economies in 2017 29 Figure 17. Poland and the UK’s trade in services (imports + exports) in 2017 by category as % of Poland’s international trade in services 30 Figure 18. Comparison of exports (in 2015) between Poland and its major trading partners, taking into account trade in value added 31 Figure 19. Comparison of imports (in 2015) between Poland and its major trading partners, 32 taking into account trade in value added 32 Figure 20. Exports of goods and services from the UK to Poland in 2017, by sector 33 Figure 21. Gross value added in 2017 industry breakdown – Poland 35 Figure 22. Gross value added in 2017 industry breakdown – UK 35 Figure 23. UK-owned non-financial sector companies in Poland by Polish Classification of Business Activities (PKD) section (number) 40 Figure 24. Employees of UK-owned non-financial sector companies in Poland by Polish Classification of Business Activities (PKD) section (thousands) 40 Figure 25. Number and headcount of BPO centres in Poland 42 Figure 26. Labour productivity of UK-owned versus domestically-owned companies in Poland 44 Figure 27. Relation of investments in fixed assets per employee at UK-owned vs domestically-owned companies 44 Figure 28. The effect of higher productivity on employee earnings at UK-owned vs Polish companies 47 Figure 29. Revenue per employee – Polish vs foreign-owned companies 49 Figure 30. Revenue per employee – Polish vs foreign-owned companies, by employment number in 2017 49 Figure 31. Labour productivity of domestically-owned vs foreign-owned companies (%) 50 Figure 32. Labour productivity of domestically-owned vs foreign-owned manufacturing companies in 2016 51 Figure 33. Change in labour productivity of domestically-owned vs foreign-owned manufacturing companies in the EU in 2008–2016 (percentage points) 51 Figure 34. Top factors expected to support business expansion on the Polish market over the next five years 54 Figure 35. Top factors expected to hinder business expansion on the Polish market over the next five years 54 Figure 36. Planetary ecosystem variables – global trends over time in 1960–2016 58 Figure 37. Global Risks Report 2019: Top risks in terms of likelihood and impact 59 Figure 38. Key SDGs according to businesses 62 Figure 39. UK energy production by source 63
84 List of tables
Table 1. Non-British population in the United Kingdom by nationality 15 Table 2. Foreign migration (permanent residence or stay of over 12 months) in 2000 and 2016 22 Table 3. Estimated temporary migration from Poland in 2004–2017 (number of persons residing abroad at year end) 22 Table 4. Money remitted to Poland by migrants in 2017 24 Table 5. Results of the estimation delivered by a panel gravity model for Poland’s foreign trade in 1995–2018 26 Table 6. Largest UK-owned companies in Poland in terms of revenue and corporate income tax (CIT) paid [PLN thousand] 46
85 Endnotes
1. At current prices. 25. Source: UN.
2. At current prices. 26. A variable in the form of a product of Poland’s and a given trading partner’s GDP may explain 46% of the variations in service trade levels 3. This actual imports plus exports figure differs slightly from the value with a sample of Poland’s 98 trading partners in 2017 (Figure 16). given above (over USD 23bn in 2018 at current prices) on account of The 46% is however much less than the 71% (Figure 10) in the case of inflation-adjusted values used for the model estimation. goods, one of the reasons being significantly higher regulatory barriers 4. Data for 2017. to cross-border flows of services.
5. Data for 2017. 27. A lower proportion, however, does not necessarily mean that the United Kingdom is not relatively specialised in the production of 6. ONS, Population of the UK by country of birth and nationality, relevant goods. In some sectors, due mainly to cost optimisation January to December 2018, https://www.ons.gov.uk/ and offshoring (e.g. when production of subassemblies is relocated peoplepopulationandcommunity/populationandmigration/ to countries with cheaper labour force, such as China or Vietnam), internationalmigration/datasets/ a certain degree of internationalisation of the manufacturing process populationoftheunitedkingdombycountryofbirthandnationality (where other countries are allowed to ‘share’ in the generation of value added) is necessary to keep export prices at competitive levels. 7. Civil Aviation Authority, Number of passengers served at Polish airports by country of destination in international scheduled traffic in 2017 28. The Eurostat data covers enterprises employing at least 10 people and 2018. operating in ‘total business economy; except financial and insurance activities’, i.e. in all economic sectors except for agriculture, financial 8. World Bank, http://www.doingbusiness.org/content/dam/ services and sectors commonly dominated by public entities (public doingBusiness/country/p/Poland/POL.pdf administration, education, culture and entertainment, and health care). 9. AHK, https://ahk.pl/fileadmin/AHK_Polen/user_upload/AHK_Ankieta_ 29. ‘Rynek pożyczek konsumenckich 2019. Analiza ekspercka Instytutu koniunkturalna_2019.pdf Staszica’ (The consumer loan market 2019. Expert report by the Staszic 10. Statistics Poland (GUS), Foreign Trade Statistics Yearbook 2018. Institute). The Staszic Institute, Warsaw, March 2019.
11. Statistics Poland (GUS), Foreign trade turnover in total and by country in 30. The Ministry of Finance. January–March 2019. 31. ‘Rynek pożyczek konsumenckich 2019. Analiza ekspercka Instytutu 12. Statistics Poland (GUS). Staszica’ (The consumer loan market 2019. Expert report by the Staszic Institute). The Staszic Institute, Warsaw, March 2019. 13. Statistics Poland, Statistical Bulletin, April 2019. 32. Customer advisors are not included as employees in Provident Polska, 14. Ibidem. thus this information does not contradict estimates that speak of 4,000. people employed in British finance companies in Poland (p. 40). 15. Statistics Poland (GUS), Business Services in 2016. 33. Due to the high variability of annual capex data, we also present 16. Statistics Poland (GUS), Foreign Trade Statistics Yearbook 2018. averaged figures. 17. OECD, FDI Figures in April 2019. 34. No information is available for earlier years on value added per 18. NBP, Foreign direct investment in Poland and Polish direct investment employee; therefore revenue per employee is taken as a proxy for abroad in 2017. labour productivity.
19. ONS, Population of the UK by country of birth and nationality, January to 35. The estimates take account of differences in both price levels and December 2018. inflation in Poland and abroad.
20. Statistics Poland (GUS), Poland 1989–2014. 36. According to a survey conducted by Nielsen for the French-Polish Chamber of Commerce, 43% of respondents prefer a foreign company 21. Statistics Poland (GUS), Information on the scale and directions of as an employer, whilst only 25% opt for a Polish employer, and 31% temporary migration from Poland in 2004– 2017. believe that the origin of the employer is irrelevant and have no 22. NBP, Poles working abroad in 2016. preferences in that respect.
23. World Bank, Bilateral remittance matrix 2017. 37. From among the former Eastern Bloc countries, Poland was the first to have been recognised as a developed country by the FTSE 100 index of 24. For a complete database of real effective exchange rates and their the London Stock Exchange. calculation methodology, see https://bruegel.org/publications/ datasets/real-effective-exchange-rates-for-178-countries-a-new- database/
86 References
1. ABSL, Sektor nowoczesnych usług biznesowych w Polsce 2018 16. Lindemanis M., Loze A., Pajuste A. (2019), The effect of domestic to foreign ownership change on firm performance in Europe, International 2. AHK Polska, https://ahk.pl/fileadmin/AHK_Polen/user_upload/AHK_ Review of Financial Analysis (March 2018), pp. 1–15, https://doi. Ankieta_koniunkturalna_2019.pdf org/10.1016/j.irfa.2019.04.004
3. Bruno R.L., Cipollina M. (2018), A meta-analysis of the indirect impact 17. National Bank of Poland (NBP), Foreign direct investment in Poland and of foreign direct investment in old and new EU member states: Polish direct investment abroad in 2017 Understanding productivity spillovers, World Economy 41(5), pp. 1342–1377. https://doi.org/10.1111/twec.12587 18. OECD, FDI Figures in April 2019
4. Ceoworld.biz, https://ceoworld.biz/worlds-best-countries-to-do- 19. OECD, FDI in figures in January 2019 business-in-2018/ 20. ONS, Population of the UK by country of birth and nationality, January to 5. Cizkowicz P., Cizkowicz-Pękała M., Pękała P., Rzońca A. (2017), The effects December 2018 of special economic zones on employment and investment: spatial 21. PAIH, List of Major Foreign Investors in Poland – 2017 / 2018 panel modeling perspective. Journal of Economic Geography 17(3), pp. 571–605, https://doi.org/10.1093/jeg/lbw028 22. PAIH, Why Poland 2017
6. Genc M., Gheasi M., Nijkamp P., Poot J. (2013), The impact of 23. Civil Aviation Authority, Number of passengers served at Polish airports immigration on international trade: a meta-analysis, in: P. Nijkamp, by country of destination in international scheduled traffic in 2017 J. Poot, M. Sahin (ed.), Migration Impact Assessment, https://doi. and 2018 org/10.4337/9780857934581.00019 24. World Bank, Bilateral remittance matrix 2017 7. Statistics Poland (GUS), Foreign trade turnover in total and by country in January–March 2019 25. Edelman, Edelman Trust Barometer 2019
8. According to the latest data for 2018, Poland's exports to the United 26. Deloitte, HR Deloitte Trends 2019 Kingdom amounted to USD 16.6 billion. At the time of closing the report, 27. United Nations Development Programme, SDG Accelerator however, no data was available on the exact structure of the export for 2018 that would allow reliable comparison of Polish and British 28. Stockholm Resilience Center, Planetary Boundaries exports and imports. Therefore, for the purposes of the analysis of the goods structure, we use data for 2017. Statistics Poland (GUS), Statistical 29. Alliance of World Scientists Bulletin, April 2019 30. World Economic Forum, Global Risks 2019 9. Statistics Poland (GUS), Business Services in 2016 31. EU Comission. Towards a Sustainable Europe by 2030 10. Statistics Poland (GUS), Poland 1989–2014 32. EU Comission, A European strategy for plastics 2018 11. Statistics Poland (GUS), Information on the scale and directions of 33. Euractiv, Organic farming improved but still flaws with traceability EU migration from Poland in 2004–2016 auditors find 2019 12. Statistics Poland (GUS), Demographic Yearbook 2018 34. EU Comission, EU budget 2020: Commission focuses its proposal on 13. Statistics Poland (GUS), Information on the scale and directions of jobs, growth and security 2019 temporary migration from Poland in 2004–2017 35. The Sustainable Development Report, SDF Index 2018 14. Iamsiraroj S., Ulubaşoğlu M.A. (2015), Foreign direct investment 36. Department for International Development, UK’s Voluntary National and economic growth: A real relationship or wishful thinking? Review of the Sustainable Development Goals 2019 Economic Modelling 51, pp. 200–213, https://doi.org/10.1016/j. econmod.2015.08.009 37. National Statistics, Digest of UK Energy Statistics 2019
15. Iwasaki I., Tokunaga M. (2014), Macroeconomic impacts of FDI in 38. National Grid, Britain’s clean energy system achieves historic milestone transition economies: A meta-analysis, World Development 61, pp. in 2019 53–69, https://doi.org/10.1016/j.worlddev.2014.03.022 39. Wind Europe, Annual Offshore Statistics 2018
87 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 244,000 professionals are committed to becoming the standard of excellence.
This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.
© 2019 For information, contact Deloitte Touche Tohmatsu Limited.