A Snapshot: UK-Iceland Trade Relations

By Misha Radkevitch
Reykjavik, Iceland © krismadden/Flickr

Mikhail Radkevitch

Building on our UK-Arctic Trade and Investment Observatory, we are now compiling all of the relevant information pertaining to UK-Iceland trade relations – and in particular, the existing investment opportunities – so you can have the information you need at your fingertips.

Period: Four quarters to the end of Q3 2021 (unless specified otherwise)

  • Rank as trading partner (goods and services):
    • 77th largest trading partner (accounting for 0.1% of total UK trade)
    • 61st largest goods trading partner (0.1% of UK goods trade)
    • 98th largest services trading partner (less than 0.1% of UK services trade)
  • Rank as export market:
    • 84th largest export market (accounting for 0.1% of total UK exports)
    • 68th largest goods export market (0.1% of UK goods exports)
    • 108th largest services export market (less than 0.1% of UK services exports)
  • Rank of import market:
    • 65th largest import market (accounting for 0.1% of total UK imports)
    • Joint 62nd largest goods import market (0.1% of UK goods imports)
    • 77th largest services import market (0.1% of UK services imports)
  • Total trade in goods and services: £976 million (decrease of 17.4% or £206 million from the previous year)
    • The UK reported a total trade deficit of £172 million with Iceland (compared to £146 million from the previous year)
      • Trade in goods deficit of £124 million with Iceland (compared to £166 million from the previous year)
      • Trade in services deficit of £48 million with Iceland (compared to a surplus of £20 million from the previous year)
  • Total UK exports to Iceland: £402 million (decrease of 22.4% or £116 million from the previous year)
    • Of all UK exports to Iceland, £335 million (83.3%) were goods and £67 million (16.7%) were services.
    • UK exports of goods to Iceland increased by 18.8% or £53 million compared to the previous year.
    • UK exports of services to Iceland decreased by 71.6% or £169 million compared to the previous year.
  • Total UK imports from Iceland: £574 million (decrease of 13.6% or £90 million from the previous year)
    • Of all UK imports from Iceland, £459 million (80.0%) were goods and £115 million (20.0%) were services
    • UK imports of goods from Iceland increased by 2.5% or £11 million compared to the previous year.
    • UK imports of services from Iceland decreased by 46.8% or £101 million compared to the previous year.
  • Outward stock of FDI to Iceland (2020): £21 million
  • Inward stock of FDI from Iceland (2020): £147 million

For further information, visit DIT’s Trade and Investment Factsheet for Iceland

Latest News about UK-Iceland Trade:

  1. As Norwegians vessels were unable to use the full extent of their capelin allowance in Iceland, the Ministry of Food, Agriculture, and Fisheries is expected to reallocate the remainder of the quota among Icelandic vessels; if the additional 50,000 tonnes are utilised, the value of the catch could be worth between two to three billion ISK ($15-23 million). (04/03/2022): https://www.icelandreview.com/news/capelin-quota-to-be-increased-by-50000-tonnes/
  2. The Directorate of Fisheries has been instructed to increase its supervision of quota permits, amid a proposed bill to grant the Directorate of Fisheries greater authority to prevent the consolidation of quota permits and deter non-compliance with laws and regulations within the fishing industry. (18/02/2022): https://www.icelandreview.com/news/consolidation-and-control-of-quota-permits-under-scrutiny/ 
  3. Startup low-fare Icelandic air carrier Play will connect Baltimore, Boston and New Windsor, New York, with 23 European destinations, including its Reykjavik, Iceland, hub, starting this spring. (13/02/2022): https://www.cnbc.com/2022/02/13/new-icelandic-carrier-makes-a-play-in-low-cost-transatlantic-market.html 
  4. Landsvirkjun and Icelandair, Iceland’s energy company and the country’s largest airline, have decided to join forces to advance the energy transition in aviation. (11/02/2022): https://www.arctictoday.com/arctic_business/energy-transition-in-aviation/ 
  5. Real estate prices have increased by 16.6% in the past year in the greater Reykjavik area, meanwhile, the number of apartments for sale have dramatically decreased going from 900 in May 2020 to just 70 at the beginning of February 2022. (09/02/2022): https://grapevine.is/news/2022/02/09/housing-prices-continue-climbing-supply-continues-falling/
  6. Icelandair formally terminated the government-guaranteed credit facility of up to $120 million, with a 90% government guarantee, that was agreed to combat the effects of the pandemic in September 2020, signalling the solid financial recovery of Iceland. (09/02/2022): https://www.icelandreview.com/business/icelandair-ends-government-guaranteed-credit-facility/
  7. The Central Bank of Iceland has raised interest rates by 0.75 percentage points meaning the key interest rate – the rate on seven-day term deposits – will, therefore, be 2.75%. (09/02/2022): https://www.icelandreview.com/news/central-bank-raises-key-interest-rate-by-0-75/ 
    • This increased rate signals an attempt to tackle high inflation rates (the inflation rate in January was 5.7% – the highest since April 2012) and the Central Bank predicts an inflation rate of +5% in 2022 (+5.8% in the first quarter), which is double the Bank’s target.
  8. Iceland’s Minister of Fisheries stated there is little evidence that whaling is economically beneficial to Iceland and that it is unlikely that any permits will be extended beyond 2023. (04/02/2022): https://www.icelandreview.com/nature-travel/little-justification-to-continue-whaling-icelands-fisheries-minister-says/ 
  9. Iceland looks to attract foreign talent following a top-10 place in the 2021 Global Talent Competitiveness Index (04/02/2022): https://www.insead.edu/newsroom/2021-global-talent-competitiveness-index-fostering-green-and-digital-jobs-and-skills-crucial-for-talent-competitiveness-in-times-of-covid-19
  10. Iceland expects tourists to spend ISK 700 billion in the country by 2030. (03/02/2022): https://www.schengenvisainfo.com/news/iceland-expects-tourists-to-spend-700-billion-in-the-country-by-2030/
  11. A total of 1,021 reindeer may be hunted during the 2022 season, 199 fewer than last year, primarily due to uncertainty about reindeer counts due to weather conditions (02/02/2022): https://www.icelandreview.com/nature-travel/reindeer-hunting-quota-for-2022-released/ 
  12. Net migration of people in Iceland last year was the sixth largest on record, counting close to 4,700 people (27/01/2022): https://icelandmonitor.mbl.is/news/news/2022/01/27/net_migration_in_iceland_in_2021_6th_largest_on_rec/
  13. The demand for foreign labour in Iceland is likely to grow over the next 3 years; 15,000 new jobs will be created but the number of Icelandic workers will likely increase by only 3,000, meaning about 12,000 additional foreign workers will be needed (26/01/2022): https://icelandmonitor.mbl.is/news/news/2022/01/26/great_demand_for_foreign_labor_in_iceland/
  14. A member of Maine congressional delegation is joining with colleagues to try to encourage more trade with Iceland (22/01/22): https://apnews.com/article/immigration-business-rick-larsen-don-young-chellie-pingree-6d5b2b21bc4ab0523456098acbfbdfee
  15. A EUR 1 billion, 14,000-km submarine fibre optic cable system that will connect Europe and Asia through the Arctic (including Iceland) will be completed by 2025, providing remote areas with good internet connection (10/01/2022): https://icelandmonitor.mbl.is/news/news/2022/01/10/fiber_optic_cable_planned_under_arctic_ocean/
  16. A new agreement between Iceland and the UK on Youth Mobility makes it possible for young people to live & work in the two countries for up to two years (05/01/2022): https://twitter.com/MFAIceland/status/1478693934650077190 
  17. Iceland will utilise carbon capture technology and its geothermal resources to drive the country towards its target of carbon neutrality by 2040 (30/12/2021): https://www.topgear.com/car-news/future-tech/iceland-wants-be-worlds-first-carbon-neutral-country 
  18. An international team, led by KCAP, has won the tender for the 55-sq-km development of Keflavik International Airport which would turn the area into a showcase for Iceland’s green hydrogen, electric aviation, hi-tech agriculture, reforestation and aquaculture (22/12/2021): https://www.globalconstructionreview.com/international-team-lands-development-of-55km-iceland-masterplan/ 
  19. Iceland will consider banning langoustine fishing for the next two years to help rejuvenate stocks in the region, following a recommendation by the Icelandic Maritime Research Institute (MRI) (20/12/21): https://www.undercurrentnews.com/2021/12/20/iceland-considers-langoustine-fishing-ban-for-next-two-years/ 
  20. Utilising data from the Icelandic Tourist Board and Isavia, Islandsbanki predicts tourism will double in 2022 from the 700,000 visitors in 2021 (16/12/21): https://www.highnorthnews.com/en/number-tourists-iceland-likely-double-2022 
  21. Iceland’s abundant source of cheap energy has attracted Bitcoin miners to the country, signalling a geographical shift away from China in the lucrative activity underpinning the crypto market (09/12/2021): https://www.ft.com/content/d2adbe2f-e1e1-41bf-9034-5b01fa95f6c5 
  22. The UK and Iceland are signatories to an agreement between 67 World Trade Organization countries, covering over 90% of global services trade, which will cut costs for businesses and consumers in the services sector by £113 billion (02/12/2021): https://www.gov.uk/government/news/uk-helps-broker-groundbreaking-wto-agreement-set-to-cut-cost-of-global-services-trade-by-113-billion
  23. The UK trade deal with Norway, Iceland and Liechtenstein comes into effect today, creating a new services and investment relationship with lower tariffs and exclusive duty-free quotas for UK exporters (01/12/2021): https://www.politics.co.uk/news-in-brief/uk-trade-deal-with-norway-iceland-and-liechtenstein-comes-into-effect/ 
  24. Iceland’s self-imposed tuna fishing quota is mostly unused, highlighting potential for foreign vessels to exploit the island’s waters (01/12/2021): https://www.icelandreview.com/business/icelands-tuna-quota-mostly-unused/
  25. The UK Government’s Trade Envoy to Iceland, Felicity Buchan, and the Trade Commissioner for Europe, Chris Barton, have been visiting Iceland to discuss and investigate the fantastic opportunities for further strengthening trade and investment between the UK and Iceland (29/11/2021): https://twitter.com/BryonyMathew/status/1464252709104664607
  26. The ruling parties of the last coalition government (The Independence Party, the Progressive Party, and the Left-Green Movement) have reached an agreement on a new government coalition, forming a new cabinet that has 12 ministers; five women and seven men (28/11/2021): https://www.icelandreview.com/politics/new-coalition-government-takes-power/ 
  27. UK-based digital lender Atom Bank has implemented a four-day working week for its employees, taking inspiration from studies in Iceland which concluded that reducing working hours 40 to 35 led to increased productivity with no consequential damage to overall business performance (23/11/2021): https://www.ft.com/content/74be800c-a346-4ff9-898f-5d029f1737b6 
  28. Chief Epidemiologist Þórólfur Guðnason expressed his belief that the peak of the current COVID-19 wave had been reached; infections have begun to dwindle, and a greater proportion of those diagnosed are already self-isolating (23/11/2021): https://www.icelandreview.com/news/i-believe-weve-reached-the-peak-chief-epidemiologist/ 
  29. Business Iceland’s latest campaign, Icelandverse, which pariodied Mark Zuckerberg’s Facebook name-change announcement, has received a strong international response on social media, leading to increased foreign investment interest in Iceland (22/11/2021): https://grapevine.is/news/2021/11/22/business-icelands-advertisement-campaign-clearly-reached-its-goal/ 
  30. The UK has announced the launch of Innovate UK’s Plan for Action for Business Innovation, which will deliver on the UK Innovation Strategy, with the vision for the UK to become a global hub for innovation by 2035 (19/11/2021): https://www.ukri.org/blog/uk-plan-for-action/ 
  31. Reykjavik City Council intends to submit a proposal to the EU’s “Climate-Neutral and Smart Cities” initiative; a draft of the application is in the works, which if approved would see the city commit to climate-neutrality by 2030 (19/11/2021): https://www.icelandreview.com/news/reykjavik-to-become-1-of-100-climate-neutral-european-cities/ 
  32. Nordic and British pension funds, including asset owners in Iceland and the UK, pledged at the COP26 climate summit in Glasgow to invest $130 billion by 2030 to fight climate change (02/11/2021): https://www.reuters.com/article/climate-un-denmark/nordic-uk-pension-funds-commit-130-billion-to-fight-climate-change-idUSL4N2RT2LG
  33. Icelandic startup Carbfix has developed a unique carbon capturing technology that turns CO2 to stone in less than two years and hopes to scale up and become Europe’s carbon storage hub (27/10/2021): https://www.independent.co.uk/climate-change/news/co2-removal-climeworks-carbfix-iceland-b1933524.html
  34. Lessons from Iceland for the UK in terms of Geothermal Energy production and use. (26/10/2021): https://www.independent.co.uk/climate-change/news/geothermal-energy-iceland-uk-renewables-b1933587.html
  35. The UK pension system has ranked in the top 10 of a new global study into retirement plans, while Iceland has taken the top spot (19/10/2021): https://www.pionline.com/retirement-plans/china-uk-gain-mercer-cfa-annual-global-pension-ranking
  36. UK-EU-Canada joint bid to ban the killing of Greenland Sharks blocked by Iceland. (17/10/21): https://en.brinkwire.com/news/britain-and-iceland-are-locked-in-a-battle-to-conserve-the-worlds-oldest-live-sharks-some-of-which-are-more-than-400-years-old/
  37. At the Arctic Circle in Reykjavik, ahead of COP26, Nicola Sturgeon has appealed to the common interests of Scotland and Arctic States to advance solutions to the climate crisis. (15/10/2021): https://www.thenational.scot/news/19649623.nicola-sturgeon-meets-icelands-prime-minister-arctic-circle-speech/
  38. With the Arctic Circle conference finally going ahead, the MSC was able to provide an in-depth seminar raising issues of challenges in the North-East Atlantic pelagic fisheries and their solutions. (15/10/2021): https://www.msc.org/what-we-are-doing/the-msc-at-the-arctic-circle-assembly-2021
  39. Climate Change issues have been at the forefront of coalition talks after the recent Icelandic election, with issues expected to be ironed out during the three-way discussion. (15/10/2021): https://www.icelandreview.com/news/climate-change-at-forefront-of-coalition-talks/
  40. A debate was held in the House of Lords European Affairs Committee regarding the FTA between the UK and Iceland, with issues raised pertaining to Northern Ireland, the EU and salmon tariffs. (14/10/2021): https://hansard.parliament.uk/Lords/2021-10-14/debates/B8E7729C-0954-4222-99FA-93A28A5592A5/FreeTradeAgreementIcelandLiechtensteinAndNorway
    • Key development towards benefits of the fisheries sector, including tariffs removed on UK import of shrimps and prawns – delivering savings of between £1-2.7 million: https://committees.parliament.uk/publications/7488/documents/78622/default/ 
    • A new emphasis placed on sustainable development under Chapter 13 of the FTA, different from UK-EU trade by the way it addresses women’s economic empowerment and trade, and climate change impacts.
  41. Iceland’s second-biggest pension fund is blacklisting 138 firms as a result of its new responsible investments policy, including the UK’s BAE Systems and Rolls-Royce (13/10/2021): https://www.ipe.com/news/icelandic-pensions-major-blacklists-138-firms-as-new-policy-kicks-in/10055639.article
  42. Lack of engagement with devolved nations regarding implementation of the UK-Iceland FTA was noted, where a debate on the agreement is due to take place on 14 October 2021. (11/10/2021): https://www.insider.co.uk/news/treasury-committee-shares-scottish-concerns-25185990
  43. The results of Iceland’s parliamentary elections were announced on 26 September, 2021, with the current coalition government of the Left-Green Movement, the Independence Party, and the Progressive Party keeping their majority (27/09/2021): https://www.icelandreview.com/politics/parliamentary-election-results-progressive-party-gains-five-seats/
  44. In order to avoid Iceland salmon from going extinct in the future, it has been suggested that a “catch and release” method must be legislated, and the fishing season should be shortened or even banned for a few years (22/09/2021): https://grapevine.is/news/2021/09/22/icelandic-salmon-likely-to-be-extinct-in-the-future/
  45. The collaboration between the British Antarctic Survey and the Alan Turing Institute has produced a  new artificial intelligence (AI) tool which they have named IceNet, which can predict with an accuracy of 95 percent whether sea ice will be present two months ahead (01/09/2021): https://www.highnorthnews.com/en/new-artificial-intelligence-tool-can-predict-future-arctic-sea-ice
  46. UK signed new free trade deal with Norway, Iceland and Liechtenstein to boost critical digital sector, slash tariffs on British food and farm products, and facilitate investment by cutting digital red-tape (08/07/2021): https://www.gov.uk/government/news/united-kingdom-signs-free-trade-deal-with-norway-iceland-and-liechtenstein

Mikhail Radkevitch is a Global Leadership Fellow at Polar Research and Policy Initiative. He is part of the PRPI team behind the UK-Arctic Trade and Investment Observatory, and serves as the lead for the Canada and Iceland.

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