You're reading: What would John Hughes say about today’s Ukraine?

Editor’s Note: On Nov. 5, Great Britain celebrates Guy Fawkes Night. In 1605, Guy Fawkes, a member of the Gunpowder Plot, was stopped from blowing up the Houses of Lords in an attempt to kill King James I. The public holiday commemorates the plot’s failure. The British celebrate the holiday by burning a dummy called a “guy,” while children collect money saying: "Penny for the guy."

The United Kingdom, one of the world’s largest financial centers, sees Ukraine as a potentially important destination for investment, especially in the oil and gas sectors.

But the current conditions on the Ukrainian side remain far from encouraging.

The arrival of British businessman John Hughes in 1869 to Oleksandrivka in the southern part of the Russian Empire turned out to be a prophecy for modern Ukraine.

By building a steel plant and several coal mines in that area, he founded a town which was called after his name – Hughesovka. Nowadays, the city is an industrial center for coal and steel in
Ukraine, with a new name: Donetsk.

Hughes “has certainly done more than anybody from abroad to make Ukraine prosperous country,” said Bate C. Toms, the chairman of the British-Ukrainian Chamber of Commerce in Kyiv. There is a statue of Hughes in Donetsk.

British businesses have followed Hughes’ roots in exploring Ukraine’s vast deposits of natural resources. British oil and gas companies – Shell, British Petroleum and JKX – have a strong presence. Their operations range from gas stations to exploration of oil and natural gas.

“There are huge geological prospects,” says Jim Bown, a British citizen, former head of British Petroleum in Ukraine and current president of Vanco Prykerchenska – an oil and gas company set up for exploration of deepwater oil and gas reserves on the Black Sea continental shelf.

London plays vital role in terms of investment throughout Europe, including Ukraine. “Money from all over the world goes to Mayfair in particular, and from there to the rest of the world,” explained BUCC’s Toms.

Bate C. Toms, managing partner at
B. C. Toms & Co. law firm.

The London Stock Exchange is the biggest stock exchange in Europe. A number of Ukraine’s biggest businesses listed their companies via initial public offering on London Stock Exchange and Alternative Investment Markets.

In total, Ukrainian companies listed in London have raised more than $5 billion via shares issuance, estimated Toms. The most recent initial public offering was carried out by a Ukrainian billionaire, Oleh Bakhmatiuk, whose egg company Avangardco has raised around $200 million in 2010.

Meanwhile, rapidly growing number of foreign and domestic businesses in Ukraine has generated demand for British expertise in legal and audit services. The Big Four, the world’s leading audit and accounting firms, together with Grand Thornton and Baker Tilly consultancy firms have found themselves busy on the Ukraine’s emerging market.

“On the legal side apart from my firm, one of the greatest firms in the world Clifford Chance, which is the first of the super top peer firms to establish them here,” said Toms, also founder and managing partner of BC Toms, a law firm operating in Ukraine. Another top British law firm running an office in Ukraine is CMS Cameron McKenna.

British businesses are also active in real estate, agriculture and retail sectors in Ukraine. Globus underground shopping center located beneath the Independence Square, along with some other major properties are owned by London & Regional Properties – one of the largest real estate companies in Europe.

“British Airways, Marks & Spencer, Mothercare – these are high street names of the U.K. doing successful business here,” said Vanco’s Bown. Altogether there are more than 100 British companies with regional offices in Ukraine.

British foreign direct investment, which stood at $2.4 billion in the first half of 2011, according to the State Statistics Committee, is also allocated in food production, metallurgy and metal working, machine building and chemicals.

The U.K. is Ukraine’s seventh largest foreign direct investor. Like most nations, Ukraine is a relatively small investor of the U.K.

Since the drop in 2009 amid the world financial crisis, British-Ukrainian trade figures have been on the rise. In 2010, bilateral trade stood at $2.5 billion.

Ukraine exported more than $1 billion in goods and services last year.

Most of these commodities were iron and steel, vegetable fats and oils, animal feed, petroleum and weapons.

Jim Bown, president of Vanco Prykerchenska
oil and gas company.

British exports to Ukraine are of a slightly bigger volume, with finished high-profile products like professional instruments, pharmaceutical products, road vehicles and specialized machinery.

Both British experts Toms and Bown said development of bilateral economic relations is constrained by the poor business climate. “The amount of foreign investment in Ukraine should be 10 times of what it is now,” Toms estimated.

“The area that needs to be most improved is the rule of law and, in particular, to do with a phenomenon known as corporate raiding, which scares a lot of investment from Great Britain and the rest of Europe,” Toms said.

Kyiv Post staff writer Maryna Irkliyenko can be reached at [email protected].