Japan Threat to Cut Investments in the UK Would Hurt but is Unlikely to Come True
Here is the opening on this important report from The Telegraph:
Japan’s companies could flee the UK post-Brexit, the country’s government has warned, if Britain is cut off from Europe and the world.
The bold statement does not reflect the public aims of Britain’s leaders nor those of the EU, but Japan’s warning reflects worries over the potential shock to global trade if ties with other nations are severed altogether.
“Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe if EU laws cease to be applicable in the UK after its withdrawal,” the government said in a statement at the G20.
The document handed a list of demands to the UK and EU, warning that tariffs on international trade “could suppress the revenues of businesses” while burdensome red tape on trade between the UK and EU would “increase the costs of logistics operations, which would have a significant impact on business operations”, and that retaining and banking passport is vital.
In plain English, it is a threat of less investment and fewer jobs.
Japan is certainly a major investor in the UK. Almost 1,000 UK firms are owned by Japanese investors, with a combined turnover of £72bn last year and gross value added to the economy of £14.5bn, according to the Office for National Statistics.
Foreign direct investment into the UK from Japan totalled a net £2.2bn in 2014, with the UK receiving half of the country’s investment into the EU, seeing Britain as a gateway to Europe.
The Japanese ambassador estimates 10,000 Japanese firms operate in the UK, employing 140,000 people.
The impact of a wholesale shift away from the UK by any large firm could be significant, particularly when companies focus in one particular region.
Nissan and Hitachi are both big Japanese manufacturers with major operations in the North East of England – Nissan’s car plant in Sunderland employs 6,100 staff, and claims that more than 24,000 jobs are created in the wider supply chain supporting the factory.
This is an informative article, well worth reading. I hope the headline above is correct, but am concerned that it may be overly optimistic. Japan will not want to move any of its expensive plant and it already has good, reliable labour in the north of England and elsewhere within the UK.
However, some EU countries have long hoped that they could attract business away from the UK. Brexit reopens covetous instincts. Nevertheless, is the insistence that the UK maintain open borders (an increasingly unrealistic and unpopular policy within the EU) more important than mutually beneficial free two-way trade with the UK? I don’t think so but more importantly Mrs Merkel still does. She may also be in the twilight of her political career, apparently determined to tell her public which way to vote rather than listen to their concerns.
Is there a hint of hypocrisy in all this? See also: Germany braces itself for invasion of Polish workers as it follows EU immigration rules. Published by The Telegraph in May 2011, you may find it interesting. My thanks to Eoin for providing it.
Direct foreign investment in the UK, not least as a gateway to the EU, was always going to be a challenging Brexit issue. For instance, the USA has far and away the most business in the UK, presumably mostly through the City. France is number two, then Singapore and with Japan in fourth position. So a lot of financial and industrial business is in play, ahead of the eyeball to eyeball Brexit negotiations. Personally, I think freedom from the EU’s absurd bureaucracy and excessive regulation, both of which play fast and loose with democracy, is in the long-term interests of an entrepreneurial UK.
Here is a PDF of The Telegraph article.
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