Doing Business in Turkey Published by Global Britain
The international business community faces a transformed Turkey. Three decades of structural reform have yielded an economy now ranked 17th globally and sixth in Europe—a testament to sustained modernisation that makes Turkey increasingly accessible to foreign investors.
As a newly industrialised country alongside China and South Africa, Turkey operates one of the world's largest free-market economies, integrated into European markets through a customs union. Its transcontinental position makes it an ideal investment gateway between Asia, Britain and the eurozone.
An emerging economic power
Turkey's recent performance marks it as an engine of the emerging multipolar global system. The country has invested heavily in technological and financial infrastructure, positioning itself as an increasingly important financial centre. Its economy has grown at 6-7% annually for much of the past two decades. Even at this year's projected 3% growth rate, Turkey outpaces most middle-income economies—a velocity European countries cannot match.
PWC estimates Turkey can maintain 3% annual growth over the next 30 years, compared with 1.6% for G7 countries. By 2023, Turkey aims to join the world's ten largest economies.
Britain's trade with Turkey has quadrupled over 15 years to $16.1bn, making Turkey the UK's 22nd most important export market and tenth largest European market. Some 2,900 British companies operate there, including BP, Shell, Vodafone, Unilever, BAE Systems, HSBC, Aviva and Diageo. Britain ranks among Turkey's largest foreign investors, with $8.6bn in direct investment between 2002 and 2015.
Post-Brexit possibilities
When asked about Brexit, Turkey's economy minister Nihat Zeybekci saw opportunity rather than crisis. "I don't see it as the UK turning its back on the EU," he said. "Rather, the EU didn't retain the UK as a member. From the EU's point of view it is a loss, but for us? We see it as an opportunity."
Turkish officials have begun work on a "new generation" free-trade agreement to coincide with Britain's EU departure. In January 2017, Theresa May announced a £100m defence deal to develop fighter jets for Turkey's air force. President Erdoğan pledged to boost bilateral trade from $15bn to $20bn.
Both governments have emphasised expanding trade and investment ties. There is scope for preferential arrangements in areas outside the customs union—agriculture, services and public procurement. Turkey and Britain face similar challenges: both must reconstruct their relationships with Europe under changed assumptions about their future status.
Market strengths
Turkey's appeal extends beyond growth rates. Its 79m population—Europe's youngest and fastest-growing—is projected to reach 83m by 2023, with half under 34. The country provides access to 1.5bn consumers across Europe, Eurasia, the Middle East and North Africa, and to markets worth $25trn within a four-hour flight.
For British exporters, principal opportunities lie in airports, environmental services, water infrastructure, financial services, education, information technology, ports and life sciences. Top exports include machinery, pharmaceuticals, vehicles, iron, steel and plastics. The healthcare sector alone offers UK companies £2.5bn annually in potential supply and service contracts.
Turkey has opened markets through economic reforms, reducing government control over foreign trade and investment whilst privatising state-owned industries. A 2012 decree overhauled investment incentives towards high-value, high-tech and export-oriented sectors. Four schemes—general, regional, large-scale and strategic—offer tax exemptions, customs duty relief, social security support and land allocation. Priority sectors include tourism, mining, transport, pharmaceuticals, automotive, aerospace and defence.
Regulatory modernisation
Turkey's 2012 Commercial Code and Capital Market Law address transparency, bureaucracy and directorial flexibility, enhancing international confidence. The Corporation Tax Law aligns with OECD transfer pricing guidelines and rules governing controlled foreign companies. Turkish accounting regulations now comply with international financial reporting standards, including audit requirements and regulations on establishment, organisation, shareholder rights, mergers and liquidations.
EU accession negotiations have positioned Turkey as a springboard to central Asian and Middle Eastern markets. Through the customs union, British firms avoid barriers encountered in other high-growth markets.
The Turkish government aims to reduce import dependence and develop domestic capabilities for exporting high-tech goods. Turkey adopted the EU's common external trade standards, meaning customs tariffs (with exceptions) match EU rates. As a WTO member, Turkey generally complies with trade agreements, though it sometimes fails to notify the organisation of import requirement changes.
Challenges and risks
Turkey has endured turbulence: terrorist attacks, political upheaval, a failed coup and border conflicts. These events have heightened risk perceptions. Operational concerns include an economy seemingly stuck at middle-income status, weak productivity, high corporate foreign debt and a large current account deficit. Turkey's currency remains vulnerable, particularly as international interest rates rise. The country faces labour market rigidity and must develop its human capital.
Hosting over 3m refugees has increased fiscal burdens, prompting sovereign rating downgrades from Moody's and S&P.
Regulatory challenges persist: bureaucracy, sudden legislative changes without consultation, and the need to demonstrate market commitment through local presence or partnerships. Tariffs on non-European imports run 3% above EU rates, varying by product. Import duties face reference pricing systems, missing control certificates and documentation requirements. Agricultural trade suffers strict quotas and steep protective tariffs. Procurement processes remain opaque and lengthy.
British businesses are sometimes perceived as risk-averse. Success requires building strong relationships, maintaining market visibility through frequent visits, and committing early to projects. Turkish companies seek partnerships and knowledge transfer rather than purely transactional exchanges. British exporters must adapt to short tender timelines.
A shared trajectory
Despite recent troubles, bilateral economic relations will grow more prominent post-Brexit. As founding members of the OECD and G20, Turkey maintains a customs union with the EU covering most goods except raw agricultural commodities. Future agreements depend on Britain's withdrawal negotiations.
The irony is striking: Britain leaves the EU whilst Turkey's perpetual candidacy may remain convenient fiction. Starting from opposite perspectives, both countries may reach remarkably similar positions. For British businesses willing to navigate complexity with preparation and perseverance, Turkey represents a rising star in a shifting global landscape—one Britain will find increasingly hard to ignore.
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