Dubai’s economic dynamism will help it withstand Iran conflict
The UAE has attracted businesses and citizens by offering both clarity and tax competitiveness. With a growing, agile economy it may now prove more resilient than Britain to the crisis in its own backyard, says Brandon Lewis
Much attention and some mockery has been piled on the plight of British citizens currently under fire in Dubai. But it’s worth reflecting on why so many individuals and businesses moved there in the first place.
In just a few decades, the UAE has completely transformed its economy, moving from an oil-dependent nation into a hub of global business and investment. This shift was anything but accidental, spurred on by long-term planning and underpinned by political and regulatory consistency – Britain should take note.
Their business freezones offered regulatory clarity and tax competitiveness while nations that traditionally attracted international investment became increasingly hostile. This business-friendly approach attracted the world’s leading names in industry to seed their futures within the UAE’s borders, confident of long-term stability.
Impressively, this approach has delivered sustained growth and innovation. In 2023 and 2024, the UAE recorded GDP growth of 3.6 per cent and four per cent respectively. Their ability to embrace future sectors at pace, rather than being bogged down by debating them, has been a key driver of such success and will help ensure resilience in the current crisis.
For example, MGX, the government-backed AI investor, is still planning to acquire $100bn in assets under management in the next 10 years, through investing $10bn annually for select companies in the UAE. To date MGX has invested heavily into Anthropic, xAI, OpenAI, Aligned Data Centers, and others, all showing a trend that the Emiraties have got their eyes firmly fixed on the future.
With businesses fearful of entering the UK market, government spending has reached record levels in an unsustainable attempt to artificially prop up the economy and forestall a politically disastrous recession, leaving us especially vulnerable to the economic fallout of the war in the Middle East
Compare this to the UK. Growth in 2025 was just a meager 0.1 per cent whilst business investment in Q4 2025 fell by 2.4 per cent, the sharpest drop since 2021. With businesses fearful of entering the UK market, government spending has reached record levels in an unsustainable attempt to artificially prop up the economy and forestall a politically disastrous recession, leaving us especially vulnerable to the economic fallout of the war in the Middle East.
Frequent resets, strict fiscal rules and repeated changes to the tax regime have created unneeded uncertainty. Britain’s regulatory environment is heavy, slow to adapt, and lacks the agility of “newer” economic powerhouses like the UAE. This sluggishness slows innovation in areas like AI and biotechnology, creating long-term drag. The Rt Hon Lord David Willetts argued in a recent report that “innovative companies move away to places where things can be done faster”. Britain risks losing what little economic dynamism remains if we do not act fast.
Productivity
To get things moving, productivity would be a good place to start. A Boston Consulting Group’s Centre for Growth report noted that if the UK’s pre-financial crisis productivity had stayed on track, the economy would be around £557bn larger today. For context, the UAE’s entire economy is roughly £280bn.
Productivity has been the greatest historic hindrance on growth, but AI has shown the potential to help overcome this shortcoming. While the government has announced an AI Skills Hub to provide adults with access to courses, we must also look at ensuring the next generation of workers receive grounded, evidence-based learning in AI skills not just in how to use the technology, but to help shape it for business and beyond.
The UK needs strategic clarity. Businesses are crying out for stability and a tax environment that is effective and predictable. They need a government that understands the impact on businesses of tax regimes and they need a strategy that can survive both electoral cycles and geopolitical turmoil.
Brandon Lewis is a former chairman of the Conservative Party