Inward investment can serve as the best proof for investors’ confidence in Cyprus, which is excelling in traditional, but also new emerging sectors of the economy. The stability, access to other markets and the European base the island offers, makes Cyprus the perfect partner for UK economic and trade interests.
How would you describe the current relationship between Cyprus and the UK?
Cyprus and the UK maintain very close relations spanning decades, with an important historical dimension and particularities arising from the Treaty of Establishment and the Treaty of Guarantee. The importance of the dual-hatted position of Cyprus as an EU and Commonwealth Member State is put into sharper focus today, and this can also be a catalyst for strengthening and expanding our existing close cooperation. The two countries are also linked by significant human ties. The Cypriot diaspora in the UK of over 300,000 consists of second, third and even fourth generation individuals who have fully integrated into British society. At the same time, British nationals living in the Republic of Cyprus is estimated at 25,000-30,000.
Cyprus is an established and stable international business centre, what advantages and opportunities can the country offer specifically to UK business?
Firstly, I would emphasise that Cyprus is a ‘home away from home’ for British citizens. A third of our visitors every year come from the UK. Additionally, a very vibrant British expat community resides on the island. English is widely spoken by Cypriots. Cypriot law is still heavily based on English Common Law, and we even share the same road system.
Cyprus offers perfect climate conditions all year round to all of those who wish to enjoy a healthy lifestyle, with a wide range of indoor and outdoor sites and activities. An excellent quality of life and a stable business environment are just a few of the many reasons why companies relocate their operations and other strategic functions to Cyprus.
The island has become an increasingly popular choice as a location for international and regional company headquarters and acts as a strategic springboard into neighbouring markets. Some of the reasons are the island’s high ranking in ease of doing business, the strong and transparent regulatory framework, the abundant high skilled human talent, low cost of doing business, tax incentives, as well as fast track mechanisms for licensing.
Cyprus has already become an increasingly diverse investment destination for large-scale projects, such as luxury hotels, marinas, state-of-the-art medical centres, and tertiary education institutions, funds and other private wealth management initiatives, as well as start-up ventures.
I am confident that post Brexit, the robust bilateral relationship between Cyprus and the UK will continue to strengthen considerably over time, especially as Cyprus can serve as an ideal EU base for British companies and individual investors. The business cooperation between the two countries presents great potential in a plethora of sectors with high added value including tourism and hospitality, the energy sector, shipping, financial services, healthcare, telecommunications, ICT, education and transport.
Cyprus and the UK have a long-shared history and have been close partners in various sectors, what would you say are the key projects between the two countries at the moment, and what kind of cooperation would you like to see developed in the future?
Cyprus and the UK have entered into a number of bilateral agreements and memoranda which can solidify their cooperation even further. The Memorandum of Understanding (MoU) on Establishing a Strategic Cooperation, which was signed in November 2022, seeks to put in place a more structured bilateral strategic cooperation in various fields, such as foreign and regional policy, security, trade, education, maritime, climate and crime.
A new Double Taxation Agreement (DTA) was signed in 2018, to replace the previous one signed in 1974, for the elimination of double taxation with respect to taxes on income and capital gains and the prevention of tax evasion and avoidance. Another significant MoU was signed at the beginning of 2023 to lay a solid foundation for the further expansion of bilateral cooperation in all important aspects of shipping. It also promotes working together, within the framework of participation in the International Maritime Organisation, to address the most important challenges facing the sector.
The UK is a key trading partner for Cyprus. What kind of British foreign direct investment has flowed into Cyprus and into what sectors?
FDI plays an important role in the global economy. It is the key driver of international economic integration, and with appropriate policy framework it can maintain financial stability, promote economic development, and enhance economic well-being.
Likewise, the importance of FDI to the economy of Cyprus is significant, due to the size of the island’s economy. As such, inward capital flows have increased over the years. Cyprus’ inward FDI stock has almost doubled in the last 10 years and most of it is channelled to the tertiary sector. More specifically, most of the investment was directed to financial and insurance activities, real estate, tourism, transportation and various professional, scientific and technical activities.
Recently, we have observed an increasing interest of investment in fast-growing sectors, such as education, as well as software and IT, reflecting Cyprus’ aspiration to become a regional hub for learning, science and innovation. Inward investment can serve as the best proof for investors’ confidence in Cyprus, which is excelling in traditional but also new emerging sectors of the economy.
What areas or niche segments in Cyprus do you think have untapped potential in terms of attracting more business and investment from the UK?
Cyprus is an EU state, geographically perfectly placed between three continents, which offers regionally and internationally unique opportunities for investment across a wide range of sectors. Traditional sectors of strategic importance such as hospitality and tourism, shipping and financial services have been the driving force behind Cyprus’ remarkable economic development in the last 30 years. In parallel, government, semi-government organisations, private sector and other stakeholders have worked closely together and set up a unique framework which offers an ideal business environment for new dynamic, fast emerging sectors.
In the coming years, Cyprus is expected, based on the liberalisation of the electricity market, to increase enormously the use of renewable energy sources, as sun and wind present untapped prospects. The market needs more green production but also higher capacity for storage and upgrading of the network to be able to accommodate the significant higher demand for consumption.
The education sector consists of state-of-the art schools and higher education institutions which receive high rankings and attract a great number of local and international students. The fact that the island is becoming a regional educational centre has already resulted in a great deal of cooperation between institutions in the UK and Cyprus. More specifically, the University of Central Lancashire (UK) has established a branch in Cyprus, which is one of the fully accredited Cyprus private universities. Furthermore, other universities in Cyprus have collaborated with UK universities to develop and offer joint academic programmes and to share common research initiatives.
Likewise, the health sector in Cyprus has been through outstanding developments, with the complete modernisation of the national health service and the significant expansion of the public and private sector. The health sector consists of hospitals and clinics that offer world-class treatments and services to patients from all over the world, and especially the UK, Europe and MENA countries, as well as the Far East. Synergies between the UK and Cyprus can deliver excellent results in all fields of healthcare, from infrastructure and mobility to training and research.
Cyprus is also creating an ideal ecosystem for information technology, research and development which currently attracts a great number of renowned companies and top talent from around the world. Some of the booming areas have been software development, data centres, customer service and back offices. For this reason, Cyprus achieved an increase of 35.6% in the innovation performance on the European Innovation Scoreboard, compared to the EU average of 8.5% between 2016 and 2022.
What new prospects are on the horizon that could help strengthen the bilateral relations between the UK and Cyprus?
I am confident that the robust bilateral relationship between Cyprus and the UK will continue to strengthen considerably over time. Cyprus remains a tried and tested reliable business partner and will seek to further advance its position as a significant international hub and investment destination.
Despite its small size and several shocks through time, the country has managed to stay on track, diversify and attract new investment, earning a reputation as one of the most resilient EU economies. Following the global economic crisis of 2012, the island succeeded to emerge stronger from an unprecedented crisis and much faster than predicted. Indeed, in less than five years, the Cyprus economy achieved full recovery and a growth of almost 4%, one of the highest in the EU. Recently the credit ratings agencies have upgraded Cyprus into investment-grade territory, and it is predicted that the economy will grow by 2.5% in 2023 and 2.9% in 2024.
The Cyprus Government has set ‘Vision 2035’, a long-term strategy, to build a resilient economy for Cyprus – a sustainable growth model focused on reforming the economy through traditional, but also new high-growth sectors, transparent governance and upgraded regulatory framework, more available financing sources, and prominence on green and digital transition.
The UK has a long-standing worldwide reputation and expertise in fields such as ICT, energy, healthcare, education and financial products, which Cyprus aspires to become a regional hub in. This, combined with the stability, access to other markets and the European base the island offers, makes Cyprus the perfect partner for UK economic and trade interests.