UK business heads to Moscow

There are few cities in the world experiencing such solid and sustainable growth as Moscow in 2013.

A new generation of well educated, smart and highly ambitious Muscovites is driving innovation and entrepreneurship at a remarkable pace.

According to a 2013 Ernst & Young report on Russia, Moscow will be the most dynamic and prosperous city in the world by 2025 and is already one of the most attractive targets for foreign direct investment (FDI) anywhere in the world.

Over half of all investment into Russia goes to Moscow and one in seven Russians now live in the capital or its surrounding satellite cities.

Moscow has emerged as a true global city state. Growth is projected at around 6.5 per cent for 2014 compared with around 0.9 per cent for the eurozone.

This is largely being achieved through a strategy of building on the wealth generated by energy resources and diversifying into a wide range of industries and sectors, such as ICT and telecoms.

The increasingly affluent middle class in Moscow, created by its business success, has transformed the whole look and feel of the city.

Public areas, such as parks, museums, the waterfront and pedestrianised streets, have been revitalised and renovated by the local authorities. Muscovites have even developed a passion for cycling and there are racks of cycles for hire across the city, inspired by London’s Boris Bikes.

One of the big growth areas is in the retail sector, fuelled not only by increased wealth, but also by the fact that Russians on average have more disposable income than people in Western Europe. Big UK brands have been swift to invest in Moscow’s retail boom.

“Moscow is the obvious starting point for international retailers looking to expand,” says Mark Faithfull, editor of Retail Property Analyst. “While luxury labels were the first to exploit the opportunities of an increasingly affluent consumer base in Moscow, the real growth now is from the global and familiar retail names, such as Zara, H&M, Debenhams, IKEA, Marks & Spencer and Topshop.”

One clear strategy to promote future economic growth is to clear Moscow’s transport arteries, which have been notoriously congested in the past. Huge progress has been made here in the last few years.

Marat Husnulin, deputy mayor for urban development and construction, explains: “Moscow used to be quite a difficult place to get around, but massive investment on new roads, bridges and flyovers, including an entirely new third inner ring road, has changed all that.

‘The same is true of the rail and underground network, which has already been fully modernised. In the past few years, 13 kilometres of new underground has been built and six new underground stations have opened. By the end of this year, 14 more kilometres will be built, which will beat the Soviet record when even in the greatest years of expansion never exceeded 13 kilometres per year.”

Another transport innovation inspired by London is to use the River Moskva for commuter travel with water buses.

Moscow recognises that its great asset is its people, and that its local skill base of motivated and educated Muscovites is hugely attractive to overseas investors and Russian companies.

The city’s five top ranked universities, including the world famous Lomonosov Moscow State University, and the numerous other business schools and institutions are seen as pivotal to future economic growth, forging links with both global companies and overseas universities.

To attract more international investors from all around the world, Moscow recognises the importance of creating a business environment that is friendly and helpful to companies. This is being achieved by streamlining processes and ensuring Moscow’s IT infrastructure is world class.

Russia’s growing consumer market, rising disposable income, expanding middle class, vast resource reserves and highly skilled workforce continue to attract investors from all corners of the world

Ernst & Young data shows that Moscow is turning the corner as a strong and reliable partner for foreign trade and investment. Respondents to their 2013 survey ranked it as the sixth-most attractive country in the world for FDI and the most attractive in the Commonwealth of Independent States (CIS) or former Soviet republics.

Ernst & Young’s 2013 Russia Attractiveness Survey concludes: “Russia’s growing consumer market, rising disposable income, expanding middle class, vast resource reserves and highly skilled workforce continue to attract investors from all corners of the world.”

Equally, the city is determined that, as it enjoys economic success, the social agenda is not neglected. Almost £13.6 billion (RUB700 billion [roubles]) out of Moscow’s RUB1.1 trillion budget is spent on education, healthcare, security and pensions.

And as new buildings spring up across the city, the authorities are determined to preserve the cultural heritage of the city through protection orders on some 2,000 historical monuments and buildings.

Therefore, it is hardly surprising that, as lifestyle in Moscow becomes more cosmopolitan with numerous cultural events and a spate of top restaurants and clubs opening, a significant number of Russians, who moved to London to work, are now returning to the Russian capital. They are returning because the opportunities for professional development, combined with the leisure and entertainment possibilities of the city, are so great.

Barry Martin, chairman of London-based relocation business The Russia House, says: “Over the past two to three years, many hundreds of Russians, who have studied, worked and lived in the UK, have relocated back to Moscow.

“Moscow is a magnet for young dynamic professionals and culture hunters, offering exciting opportunities, good lifestyle and much more. We see this trend clearly in our role as facilitator for British-Russian trade, working with Russians in the City of London and assisting British companies securing contracts in Russia.”

Olga Krylova, senior director of Pfizer Russia, who lived and worked in London for more than ten years, but is now back in Moscow, says: “It’s not that I don’t love London, but things have changed so much back home that there are better opportunities for me there.

“The economy in Moscow is going through the roof for young, educated Russians and the possibilities are limitless. Lifestyle is no longer an issue, whatever London has to offer, you can get in Moscow now.”

So Moscow is emerging as an economic powerhouse to rival other great cities of the world. And perhaps more than the other BRIC economies of Brazil, India and China, Russia’s growth, led by Moscow, is at a more sustainable pace and direction with a highly developed and diversified services sector and high-end manufacturing, driven by innovation and sheer ambition to succeed.