British exporters are missing out on Poland’s booming market

1. British exporters are missing out on Poland’s booming market Michael Dembinski Head of Policy, BPCC • Stoke-on-Trent, 30April 2008 British Chamber of the Year 2008, 2007, 2006, 2005

2. Poland is EU’s fastest growing large economy • In terms of GDP and population, Poland is larger than all the other CEE countries that joined the EU on 1 May 2004 combined (38.2m inhabitants, $420 billion GDP) • Last year, Poland’s economy grew by 6.5%. • Average wages are up by 10.8% in year to March • Consumer spending up by 15.8% in year to March • New car sales up by 22.9% in 2007 • Unemployment down by half since early 2004 – low single figures in biggest agglomerations (Warsaw, Poznań, Gdańsk, Katowice, Kraków, Wrocław). Not a one-city economy (unlike most other countries of the region). • Poland now in Schengen zone, no waiting on borders

3. EU structural, cohesion funds boost economy Structural& Cohesion Funds • 2004-2006: €12.8 billion • 2007-2013: €67 billion • (plus matchfunding – another €23 billion) • Money earmarked for infrastructure (€28 billion), regional development, enterprise development, skills training (€11 billion), business competitiveness, to be spent between now and 2015/6 (‘n+2’/‘n+3’) • Will change the face of Poland.

4. Trade between UK and Poland PLN billions Source: Polish statistical office (GUS)

5. Trade between UK and Poland GBP billions Source: Office of National Statistics

6. Putting export performance into context • UK is Poland’s fourth largest export market (position unchanged since 2005) • UK is eighth largest exporter to Poland (position unchanged since 2005) • Poland is UK’s 20th largest export market (up from 26th in 2005) • Poland is 20th largest exporter to UK (up from 25th in 2005)

7. Trade in mfg. products between UK and Poland

8. Trade in food products between UK and Poland

9. Rising zloty £1 = 4.38 zł £1 = 7.15 zł Zloty appreciation in %age terms (1 May ‘04=0) Monthly average value of PLN. Source - NBP

10. Where’s the zloty likely to go? • No great rush to enter Eurozone. Target date of 2012 seems unrealistic. Could be as late as 2018 at rate as low as 2.50 PLN to € • Expect zloty to strengthen further (Harrod-Samuelson-Ballassy effect) while productivity continues to rise • Remember Spain in the 1980s? • NO sub-prime/Northern Rock style banking disasters likely.

11. A different story in 2004... • Investors: worth investing in real estate, greenfield developments, new factories aimed at manufacturing for export markets • Employers: recruit Poles to work for you in Poland or in UK – average wages >six times lower • Importers: worth buying cheap in Poland, selling with a good margin in the UK • Exporters: ‘Poles can’t afford our products’

12. A different story today... • Investors: go for M&A, buy existing businesses, slim down and sell on • Employers: you’ve missed the boat! High-end international recruitment (specialists, execs). Average wages < three times higher than UK • Importers: go for quality not low price • Exporters: THIS SHOULD BE A GOLDEN TIME FOR YOU!

13. Poland’s demographics Age Year of birth 2008* 2003 1990 1983 1967 1957 1946 *Forecast Source: GUS, 2006 data projected to 2008

14. February 2007 Tri-City Warsaw Poznań Łódź Wrocław Silesian Agglomeration Kraków

15. The Poland migration phenomenon The UK opened its labour market to citizens of the new Member States on 1 May 2004 when they joined the EU. Since then, the UK has experienced an inward migration unprecedented in its history in terms of scale and speed. The largest national group in this mass migration are Poles. Their presence creates new business opportunities for many sectors of UK commerce Unlike previous waves of immigrants to the UK, Poles are widely distributed around the country and not confined to large cities

16. Poles most numerous group of new EU migrants An estimated 900,000 Poles have come to live and work in the UK 1 May 2004, of which 508,000 are registered. [source: Accession Monitoring Report, Home Office] A further 60,000 Poles are self-employed (no registration needed); 350,000 could be working without registration. 57,000 Polish-born UK citizens in 2001 census, plus 100,000 2nd and 3rd generation Poles (various levels of identification).

17. Snapshot of the Polish migrant worker Poles among the worst paid group of foreign workers in the UK – average wage £7.30 (2005/6) Average annual wage: £15,550. But: Hard working (second-longest working hours among all migrants) Very high level of employment, very low level of unemployment, lowest number of benefits claimants of all migrant groups High numbers of graduates, high number of self-employed. * Sources: IPPR ‘Britain’s Immigrants’, Sept 2007; Accession Monitoring Report May 2004 - Dec 2007

18. Polish migrant workers and UK economy Many remit money home to families in Poland; average amount sent £500/month (sources: OneMoneyMail, Western Union, NatWest Bank); total amounts to some £1.8 billion a year. According to the Centre for Economic and Business Research, the disposable income of Poles in the UK is between £3.5-£4 billion a year. This works out at around £4,500 per worker ‘It’s like adding the demand of a city the size of Liverpool to the UK economy in just two years’ – Prof. Doug McWilliams, chief executive, CEBR. Will the drift back begin in earnest? Will they be able to buy their favourite British products back home?

19. Polish migration to UK slowing down 2006 saw the high-water mark of Polish migration. Since Q2 ‘07, year-on-year registrations of Poles has been dropping 2006 2007 Y-o-y change % Q1 31,920 35,785 +10.8%Q2 38,125 37,250 -2.3%Q3 45,465 41,010 -10.9%Q4 46,985 33,495 -40.3% [source: Accession Monitoring Report, Home Office] However, there is no data to show that Poles are returning home in large numbers; most who’ve come over since 2004 plan to remain in the UK, at least for the short- to medium term. ‘Pendular’ migration phenomenon. 350 flights a week UK-PL

20. Poland: The bottom line • Economic growth expected to be reasonably strong (4.5% - 5.5%) over coming five-six years • Poland well-insulated against harshest effects of global downturn • EU-funded projects will change the way Poland looks and works • British goods and services more competitively priced, more accessible to Polish consumers and business than ever • Get involved before it’s too late!

21. Poland: The bottom line (cont’d) • High potential domestic market(both consumer and corporate) • Regional manufacturing/outsourcing platform • Regional market entry opportunity • B2B advisory market worth €250m – growing at 15% p.a. (UK market worth €18 billion – but growing at 1% p.a.)

22. Exporting to Poland: What to watch out for • Red tape (esp. VAT, certification) • Poor transport infrastructure • Currency fluctuations (short term) • Establishing trust with your Polish agent/distributor is a key issue; cultural differences in doing business should not be ignored • ‘The margin lies with the party that takes the initiative’

23. Direct export – bigger margin 50% UK 100 PLN £12 Poland €19.50 €25 115 PLN £42 30% 30%

24. BPCC 6thAnnual ConferenceWarsaw, 20-21 April 2009 Business breakfasts Business mixers Academy Series Sector forums Executive forums UK Roadshow Poland Roadshows 200 events a year focused on UK-Polish trade and investment! Trade fairs, missions, matchmaking, desk research, site visits