Budget announcements on aid restrict opportunities for British businesses, to the delight of the Kremlin
The much anticipated first budget by a Labour Government in almost fifteen years has no doubt attracted the headlines. But, avoiding the headlines and much of the Commons’ fervour were policies on aid.
As part of the Budget, there are significant drops to the aid budget. Indeed, UK aid will drop from the current £15.3 billion, amounting to 0.58% of GNI, to £13.7 billion in 2025-26, making up 0.5% of GNI. This, coupled with almost a third of aid spending being spent on refugees within the UK, adds up to a frightful policy for UK business and foreign policy.
Not only is this an amoral move at a time when humanitarian needs are at their greatest, but it will restrict the opportunities for UK businesses and investors, all while expanding those of Russian state-backed companies which thrive when the West takes a backstep. The City has a powerful voice. It should shout its opposition to these plans from the top of their skyscrapers.
The reality is that the developing world offers enormous opportunities for British businesses. Africa has the potential to be an enormous export market. By 2050, the continent's population is projected to reach 2.5 billion, and it is already demonstrating strong investment returns—outpacing other developing regions. Yet, over the coming decades, without action, the number of those living in extreme poverty in Africa will increase, frustrating the development of Africa’s business environment.
For the continent to increase the size of its middle class, and generate new trading opportunities, it will have to address education. In sub-Saharan Africa, less than half of children finish primary school with the minimum reading proficiency. Britain has had a substantial role in boosting the education of children, with 20 million children receiving an education due to UK aid since 2015, and that should continue.
The continent is also home to a substantial share of the world’s critical minerals. The World Economic Forum predicts that Africa holds 30% of the world’s mineral reserves, and demand for rare earth metals is expected to double by 2030. Key components in powering modern digital technologies like semiconductors, electric vehicles, and smartphones are almost entirely localised within the continent. Access to Africa’s resources will help UK businesses become leading players in the global energy transition and digital age.
However, the growing significance of Africa as both an economic and strategic player is attracting the attention of hostile states like Russia. Moscow has been exploiting underdevelopment across the continent to advance its own geopolitical and commercial interests.
The Ministry of Defence has recently highlighted that state fragility results in the creation of new vacuums, and provides fertile grounds for external actors seeking to extend their influence. Russia, having an immensely reactionary foreign policy—waiting patiently for a crisis to emerge—has manipulated fragility and poor governance in Africa for its own geopolitical and commercial gain, restricting the West from influence and opportunities. As Western development, military and political support has retreated, Russia has stepped into the void.
According to the Fragile State Index, twenty African states are classed as being in ‘alert’ status and 30 in ‘warning’ status on fragility. DRC, Mali, the Central African Republic and Libya all have rankings all above 8.7 out of 10 in state illegitimacy, and have all seen greater involvement of the Wagner Group. In exchange for propping up regimes, Russia’s Wagner Group is free to exploit the region’s rich reserves of minerals, with the country gaining exclusive rights to mining activities.
Weak governance, state fragility and Russia’s influence makes it significantly more difficult for UK businesses to operate and tap into Africa's potential. Given that Russia sees foreign affairs as a zero-sum game—anything that damages the West is good for Russia—weakening opportunities for UK businesses counts as a success to Moscow and Wagner. Dealing with fragility therefore has to be paramount. The Government cannot risk more countries and the opportunities they could hold falling to the mercy of the Kremlin.
Strong and effective aid—particularly in strengthening government, institutions and civil society—is key to achieving this. The OECD has stated that official development assistance is “a vital and stable resource for fragile contexts that has been resilient to crises.” It can act as an immune system to defend countries from the rising influence of Russia, and strong institutions can contain the actions of groups that threaten a society’s well-being. Much of the world’s political violence is a result of weak governance and institutions. Yet, UK government spending on strengthening governance and civil society has been cut already by over a third between 2019 and 2022, and as a result of this budget’s announcements, will only decrease further. Moscow will be in joyous celebration.
As the Chancellor looks to go ahead with even deeper cuts to the aid budget, it is vital that UK businesses and investors make their opposition clear. Without sustained and more effective aid, the opportunities in Africa—and elsewhere—will increasingly fall to rival powers like Russia at the expense of the UK, or not come to fruition at all.