Pernille Rudlin - Rudlin Consulting

About Pernille Rudlin

Pernille Rudlin was brought up partly in Japan and partly in the UK. She is fluent in Japanese, and lived in Japan for 9 years.

She spent nearly a decade at Mitsubishi Corporation working in their London operations and Tokyo headquarters in sales and marketing and corporate planning and also including a stint in their International Human Resource Development Office.

More recently she had a global senior role as Director of External Relations, International Business, at Fujitsu, the leading Japanese information and communication technology company and the biggest Japanese employer in the UK, focusing on ensuring the company’s corporate messages in Japan reach the world outside.

Pernille Rudlin holds a B.A. with honours from Oxford University in Modern History and Economics and an M.B.A. from INSEAD and she is the author of several books and articles on cross cultural communications and business.

Since starting Japan Intercultural Consulting’s operations in Europe in 2004, Pernille has conducted seminars for Japanese and European companies in Belgium, Germany, Italy, Japan, the Netherlands, Switzerland, UAE, the UK and the USA, on Japanese cultural topics, post merger integration and on working with different European cultures.

Pernille is a non-executive director of Japan House London, an Associate of the Centre for Japanese Studies at the University of East Anglia and she is also a trustee of the Japan Society of the UK.

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Here are my most recent posts

Why the Japanese should be more like the British

A book about the British way of life – “The British clear cut, simple way of working: How they achieve results with the minimum necessary effort” – has just been published in Japan, written by Kazuya Yamazaki, who lived in the UK for 12 years, practising as an architect. He recommends that Japan adopt the British attitude as a way of dealing with an ageing, post-industrial society. This does, however, mean that Japan has to drop its “customer is god” belief.

He asserts Japanese business people experience unnecessary stress being pushed around by unreasonable demands from their colleagues and customers. The UK has the image of a mature, “country of gentlemen” where people try to get to the pub before it gets dark and give the impression of not working that hard. However, Yamazaki says, through meeting many types of British people in the course of his work, he has come to realise that the British people have the knowledge of how to live in a matured country and not to struggle for impossible growth.

He contrasts this with the “majime” of Japanese people. Majime is one of those untranslatable Japanese concepts – a mix of serious, earnest, honest, diligent, solemn. Japanese “read the air”, “are strict about punctuality”, “rigorous in their provision of customer service”, “try to do their work perfectly” it is said. Majime is of course meant positively, but can be the cause of excessive stress, he says, and I cannot but agree. And this is particularly bad, I understand, in Japanese architectural firms where I have heard it is the norm to sleep under the desk at night.

Yamazaki is keen to say he does not mean the British are not serious, rather that they have the secret of how to “unhunch” their shoulders and produce results, step by step. The key is to be warikitta “clear cut”, or rational in your thinking, Yamazaki stresses. For example, rather than aiming for 100%, aim for 70% if it achieves your objectives.

The customer and the supplier are equal in the UK, says Yamazaki. The British way of communicating reflects this. It may seem like they are being argumentative, but the idea is to debate, exchange opinions and through this find areas of compromise and pitfalls in each others arguments. “Good enough” may feel to Japanese like they have given up, but for the British there is no such negative connotation. It has two meanings – firstly, for present purposes, it is sufficient, and it is a decision not to make unnecessary efforts. Secondly, rather than try to achieve what has been decided, keep calculating backwards from the objective. Japanese people instead think too much about what should be, trying to do what has been decided in the way it was decided it should be done. Of course it is important to carry out what has been decided, says Yamazaki, but if you try to do it perfectly you end up taking unnecessary steps, which is a waste.

In a way it’s easier not to change, to just carry out what you have been told is the decision. To be flexible, and change as necessary, reviewing the problem, requires wide knowledge and experience. It may sound as if a “matured country” has no further way to develop, but Yamazaki thinks that if Japan could be more “clear cut” about what to choose and what to throw out, it could clear a path to the future.

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Putting the Softbank/ARM deal in context – an exception in so many ways, is also not

To understand the sheer scale of the proposed £24bn Softbank acquisition of UK based chip designer ARM – we estimate it would increase investment by Japanese companies in the UK by over a half of the current cumulative total. Britain benefits more from Japanese investment than any other country in the world apart from the US and this deal would certainly maintain that claim, despite Brexit. By the end of 2014, the total value of Japanese investment in the UK was £38bn – to which should be added Mitsui Sumitomo Insurance’s acquisition of Amlin for £3.5bn in 2015.

There have been plenty of other acquisitions these past 15 years of UK iconic companies by Japanese companies, such as Nippon Sheet Glass acquiring Pilkington for £2.2bn in 2006 (interesting to note that ARM’s chairman is Stuart Chambers, who was CEO of Pilkington when NSG acquired it). The number of acquisitions probably accounts for the discrepancy between the Japanese Ministry of Foreign Affairs estimate of the number of Japanese companies in the UK of 879 – rather lower than that of the Teikoku Databank figure of 1380 noted previously. Of these, 470 are classified as incorporated (as opposed to branch offices) and many, as we pointed out previously, cover the whole European region. As well as concerns about losing “financial passporting” and the impact of tariffs on supply chains, a further 158 are R&D or design centres, which may well benefit from EU funds – which may mean relocating should those funds no longer be available post-Brexit.

JETRO, the Japan External Trade Relations Organisation surveyed 54 Japanese companies in the UK just before the EU referendum vote. 64.8% saw Brexit as having a negative impact on their business, with “Don’t know” 25.9% and “no impact” 9.3%. Several responded that they were looking at relocating to Germany, the Netherlands or Ireland. As JETRO points out, all three countries have strong economic links to the UK, so relocation there will not avoid being influenced by what happens to the UK and how Brexit impacts the EU.

The Japanese Chamber of Commerce & Industry in the UK has compiled the UK-Japan trade statistics for the past 15 years and it is noticeable that there is no clear trend in imports of goods from Japan – fluctuating between a high of £9bn in 2001 and a low of £6.7bn in 2009, and currently at £6.9bn for 2015. There has been an upward trend in UK export of goods to Japan, from around £3.5bn 15 years’ ago to over £4.5bn in recent years. A £3bn or so trade surplus in Japan’s favour nonetheless persists. But it is only literally half the story, The UK’s exports to Japan are actually around £9.9bn as of 2012 according to the UKTI. The other half are exports of services, primarily financial, but also legal, advertising, media, consulting etc.

The Japan-EU Free Trade Agreement is supposed to be finalised by the end of the year, and apparently may be worth £5bn a year to the UK. It will mean the elimination of the vast majority of trade tariffs, boosting imports and exports in agriculture, car manufacturing and clothing. There are still issues to be resolved on auto and agricultural tariffs as well as government procurement. And of course, how it will apply to the UK once it leaves the EU is a big unknown.

Looking at the development of Japanese companies in the UK over the past 40 years, apart from the big automotive manufacturers, it is clear that, as I wrote in my history of Mitsubishi Corporation, the UK has become a coordination and financing/marketing hub for Japanese companies in the region. Most of the famous Japanese names, such as Sony, no longer have mass production in the UK. Sony has a manufacturing centre in Wales, but it develops and produces low volume professional audio visual equipment. Even in the automotive sector, if you look closely at parts manufacturers such as Sumitomo Electric Wiring, which acquired Lucas SEI in 1999, or Yazaki, their operations in the UK are mostly development, design and engineering, or regional coordination. Their UK factories were shut down and production moved east or to North Africa years ago.

So Softbank’s acquisition of ARM, an exception in so many ways, is also not. It is buying into the UK’s design and technology expertise, as well as multinational marketing and management skills. Forty plus years of trade in the EU and the development of the Single Market has done exactly what the textbooks would predict, which is to make it clear where the UK’s strengths are – design, engineering, finance, marketing, legal and other services and some high end manufacturing. The revival of mass car production in the UK is because of our membership of the Single Market. The UK on its own is not enough to sustain a car industry (see the paragraph in my blog post here regarding the 100 million market theory).

The Japan-EU FTA is meant to cover services as well as products but the EU single market in services has not progressed for a while and it looks like the Transatlantic Trade and Investment Partnership, which would cover EU-USA services, is faltering. It does seem like the UK is going to end up spending enormous amounts of its resources and energy on unpicking 40 years of trade arrangements which have already had a profound impact on its economy, at a time when those resources would have been better devoted to developing agreements which would help the UK play to its strengths.

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How to negotiate with the Japanese – don’t

A friend from business school days phoned me last week to ask for my advice on negotiating with Japanese business people. He was about to fly out to Japan to meet a potential joint venture partner. “I suspect my usual negotiating style might cause offence”, he said. “And apparently I may already have committed a faux pas, because when we met with them in the UK, I tossed my business cards around the table”.

After explaining how to exchange business cards with slightly more finesse, I asked him for full details of the company and people he was going to meet. One lesson we learned during our negotiation course at business school, which is applicable whatever the culture you are dealing with, was “prepare, prepare, prepare”. This means not only knowing as much as you can about the people and company you are meeting, but also being an expert in every single detail of your company and its products or services.

I warned him that other approaches we learnt at business school may not work so well if his counterparts are traditional Japanese business people rather than MBA wielding ‘young guns’. Traditional Japanese business people want to be reassured that you are someone they can trust in the long term. If they spot that you are using tricks and tactics in your negotiation, they may worry that you are insincere and that in the future, if something goes wrong in the deal, you will be adversarial rather than cooperative. For example, it is better to open with a reasonable offer price, rather than a deliberately outrageous position from which you expect to be beaten down by half.

Other negotiating tactics, such as having a BATNA (best alternative to negotiated agreement) may be useful, and indeed you may be asked who else you are talking with or supplying to. Too much focus on a written negotiated agreement may be a mistake however, as it will not be the endpoint with a Japanese partner, rather the start of a relationship, subject to change and unofficial amendments in the future. Also, your Japanese counterparts may need to have further internal discussions, so do not expect to come out of a meeting with the final deal.

The amount of time this takes, and the seemingly unending questions may result in the Western side beginning to wonder if they are trusted, and if the deal will ever happen. Westerners prefer to make step by step concessions, expecting give and take, particularly when it comes to divulging sensitive information. Japanese negotiators want to know and even see everything before they make any commitments. This is due to risk aversion – they know that none of the executives on their side will want to agree to anything unless every single possible risk and issue has been uncovered and dealt with. But of course this can be a deal breaker for the Western side, who do not want to show all their intellectual property or ‘dirty laundry’ until they can be reasonably sure of good faith on the other side, that the deal will go ahead.

Indeed much of the concrete detail may be settled outside the negotiating room. When I was working in building material sales in Japan, our Zimbabwean suppliers used to visit once a year to negotiate prices and shipping schedules. The first time I participated in the negotiation meeting I was surprised to find that we spent the first day exchanging data and views on industry trends. During a coffee break I asked one of the Zimbabweans when we would get down to the ‘real’ negotiation and talk about prices.

“Don’t worry,” he said, “tonight your boss and my boss will go out for a Korean barbecue and some beers, and they’ll settle the prices then. It happens every year.” Sure enough, the next day, as if by magic, a piece of paper with agreed prices appeared.

This article by Pernille Rudlin originally appeared in the Nikkei Weekly. This and other articles are available as an e-book “Omoiyari: 6 Steps to Getting it Right with Japanese Customers”

Japanese companies move into sort-of reassurance mode re Brexit

Both Nomura and Toyota have moved to reassure their employees their jobs in the UK are safe – for the time being. The devil is in the detail of course – Toyota says plans through to 6 or 7 years from now have already been made, after which, no one can predict anyway, and Nomura’s new COO says London will remain the main brokerage in Europe and there are no plans to move jobs to elsewhere in Europe in the next two years.

Both companies are in our Top 30 Japanese companies in the UK, employing around 5,500 between them. Toyo Keizai magazine’s recent article on whether Japanese companies will move away from the UK has helped us update the ranking further, and we can now say just under 100,000 people are employed by the Top 30. The article goes on to speculate what Hitachi might do about its rail business if the UK was to leave the single market and default to tariffs of 10%. The global headquarters were moved to the UK in 2014 and a factory has been built in Newton Aycliffe. Hitachi is competing with Bombardier (Canada), Siemens (Germany) and Alsthom (France) – the latter two being in the European Union and the eurozone of course.

“Japanese car manufacturers underpin the UK automotive industry”, says Toyo Keizai. Honda, Nissan and Toyota represent half of the 1,590,000 cars that were produced in the UK in 2015, with Nissan being the second largest manufacturer in the UK after Jaguar Land Rover. Around 80% of Nissan’s cars, manufactured in Sunderland, are exported to the EU and elsewhere. NIssan directly employs around 8000 people across the UK, and indirectly a further 32,000.

Yet 61% of Sunderland voters supported Leave, despite the fact that if access to the EU market is restricted, they are likely to lose their jobs. For Honda and Toyota, the UK only represents 2% of their total production, compared to 10% for Nissan. As the utilisation of Nissan partner Renault’s factories is not high, it’s likely production will shift to France.

However it takes time to shift production. “What sort of deal Carlos Ghosn can get from the UK government will influence how the rest of the Japanese car manufacturers will view production in the UK” says Takaki Nakanishi of the Nakanishi Research Institute.

Other issues for Japanese companies are whether the UK retains financial passporting, and for Takeda and other pharmaceutical companies, whether the European Medicines Agency stays in the UK or not.

Japanese companies in the UK

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“Japan should forget about a UK which has lost its value through Brexit”

“The UK referendum to leave EU is similar to Republican party in that it was a decision on emotional grounds”,says Atsushi Osanai, Professor at Waseda University, formerly of Sony, in a column for Diamond Online. The Republican party’s nomination shows how American society has become deformed, now superseded by Brexit. Other than self respect as the Great British Empire, it is hard to see how the decision has any merit, and instead beckons a world financial crisis, and destabilising the global economy.

Although most of the Japanese media has focused on what the effect on the Japanese economy might be, what is the real impact on Japanese companies? In Osanai’s opinion, although there will be short term impacts in terms of a high yen and weakening share prices, as it will take at least 2 years for the UK to leave the EU, the chaos will not last in the long term.

“In the immediate future, there will be a reduction in profits for Japanese exporters because of the higher yen and a reduction in in-bound tourism to Japan. On the other hand, Japanese outbound tourism will become cheaper, and it will be easier to afford Burberry. So long as it is only the UK that leaves the EU.”

One further possibility, is that unexpectedly drastic changes in the exchange rate and share prices might put the spotlight on Abenomics leading up to an election, but Osanai expects that the Japanese people will be reasonably objective in their assessment of this.

“Another not inconsiderable impact of Brexit is that the EU will lose around 10% of its funding and also that the UK may well cease to be a financial centre for the EU. There is also a possibility that Japanese car manufacturers and companies like Hitachi which have been expanding their rail business may find that their export hub to the rest of the European Union has been undermined.”

“This will depend on whether the UK and the EU can come to an agreement on tariffs. Of course for Japanese companies the ideal would be for export tariffs to be as low as possible. But Osanai thinks that in the long term, the EU should impose penalisingly high tariffs. As the world economy is stagnating, major countries are becoming more cautious and putting their own needs first, and it is of concern that a huge economic region like the EU might fragment, producing a situation like the eve of another world war.”

“So for Japanese companies, it’s not just a UK shock, but whether the EU as whole will be stable in the future. It’s not just about investment in one country, but whether to expand in the whole region.”

A benefit from the EU that the British themselves do not recognise

Osanai asks whether for Japanese companies the UK itself is that attractive, and replies “no”

“Europe itself is a large market, however there are several unaligned small-medium scale countries and at a country level, they are not that strong economically. The merit of the EU is that through a strong currency in the EU (which the UK is not part of), goods can flow freely and people can move freely, which stimulates regional trade and mobility of the labour force.”

“For 20^th century UK, which had a stronger economy and manufacturing sector than even major European countries such as Germany and France, there might have been a reason for keeping the country more closed in terms of tariffs and immigration. If the UK as market was attractive, it would still be worth Japanese and other multinationals investing there.”

“However present day UK is not so attractive. Because it was in the EU, it had attraction as a gateway into the EU. And thanks to the free movement of people, it meant cheap labour could still be hired. Post Brexit, there will be high tariffs and high labour costs.”

“There are other countries in the EU who are starting to put their own country first and movements which want to leave. Because of this it is unlikely the EU will give the UK favourable terms to leave. Frankfurt could easily take over from London as the financial centre of the EU.”

“Non EU multinationals such as Japanese companies may find themselves being approached by France or Germany. In the second half of the 20^th century, the UK was a leader in the EU, and as the English language was the world’s common tongue, it was an obvious place to have a subsidiary. However, Sony has recently moved its TV production from the UK to Spain and the Czech Republic.”

“Furthermore, the fact that the only countries that welcomed Brexit were Russia and China is very disturbing, says Osanai. China is increasing its investment in the UK, so perhaps it is hoping that after leaving the EU, the UK will come begging to it, increasing China’s sphere of influence.”

“And the UK itself may disintegrate into Scotland and Wales and Ireland.”

“The world needs to show the UK how little merit there is in leaving the EU, and the need to avoid the disintegration of the EU. For that reason, Japan should dump the UK.”

“Although we shouldn’t ignore China’s investment in the UK, the main rivals to Japan’s manufacturers are not in the UK but in Germany and France. So Japan’s manufacturers need to get over their UK shock and build a foundation for competing with EU countries for market share. There are two years of breathing space at least. Electronics and automotive manufacturers should start looking at the continent.”

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What will happen to Japan’s supply chains in Europe post Brexit?

I found the lack of understanding of how trade actually works – particularly in regard to the complex supply chains – amongst those campaigning for the UK to leave the EU, really worrying. The idea that you could, for example, say something was a “German car” which the Germans would be desperate to sell to the UK, when it might have been designed, financed and maybe even built with wire harnesses from the UK – and could be a Japanese brand! This worry is confirmed by an article which recently appeared in the Nikkei Online, by Takanori Sakaguchi, a purchasing consultant.

“To be frank, like most of our readers, I was not expecting the UK to vote to leave the EU. Sterling plummeting, the Yen strengthening, share prices falling, this scenario was just a simulation”

Sakaguchi thought it would be like the Scottish referendum, with 55% voting to stay. “Economists warned the economic damage would be unavoidable. Over half of UK’s exports go to the EU. The majority of multinationals’ European HQ are in the UK, where business can be conducted in English.”

The writer’s contacts who were expatriates in the UK all said that if the UK left the EU, then the reason for being in the UK would be eradicated. Employment rights were also protected by being in the EU.

“If the UK left the EU, it will take an extraordinary amount of time and effort to reach free trade agreements with each country. Furthermore, once it has left the EU, it would take 10 or 20 years before it could return.”

“It is unclear what the 2 year negotiation is going to be like, as there is no precedent. It is likely, in order to discourage others from leaving, that EU countries will take a tough stance. It is unclear if the UK will be able to avoid immigration inflows and if that will lead to a reduction in unemployment for its own people.”

“There is a 100 million theory in the automotive industry – if 1 country has more than 100m population then should be able to sustain a car industry – acquiring all parts and technology locally. Japan and the USA can therefore sustain a home-grown car industry. None of the countries in Europe has a population greater than 100 million, so that was a good reason to create the European Union. For it to work, there needs to be standardization of legislation, systems, policies and engineering methods. There is no alternative.”

Short term

“In the short term, there will be a cheaper pound, a fall in asset prices and share prices. There will be those who try to make use of a cheaper pound to “buy UK”. For retailers, it will be beneficial.”

“However, currently companies are cutting back on investing in UK capital investment, and will become even more cautious about this if the UK leaves the EU. It’s likely that those who have invested and have not made their money back, will withdraw.”

Medium term

“Although they may benefit short term from a cheap pound, manufacturers will think about shifting to other countries in order to protect their competitiveness, so in the mid term, jobs will shift. Companies will also be assessing whether to keep factories and suppliers in the UK.”

“Also there will be new UK-only labour laws, which may mean increased costs – another reason to leave the UK.”

“Supply chain costs to the UK are likely to increase as the main labour supporting it is on the continent, particularly if there is a labour shortage in the UK as well. It will make manufacturing in the UK even less competitive.”

“Supply chains are also likely to become more complex if the UK starts to implement its own rules and regulations.”

“The key thing about supply chains is that they are a way of spreading the risk in case one part is affected – as per ASEAN economic cooperation and concerns about tsunami or earthquakes.”

“Yet the UK chose independence and control over any negative economic impact. It is difficult for supply chains to read what is going on, but surely as any country leaves an economic area, they will adjust their strategy. This is a never-ending fight between sovereignty and free markets.”

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A local solution to breaking the Brexit deadlock

The only things we can be sure that the EU referendum was about was that it was a majority vote for leaving the European Union and an endorsement of the main promise offered by the Leavers to “take back control”. However the economically non-damaging options (for example staying in the European Economic Area, the so-called Norway option, which business favours) need the UK to sign up to free movement of people.

My cross cultural professional insight on this being that the French and German leadership are likely to be highly rules/principles – and no exceptions – based about this, as one of the fundamentals of Europe.

So. The bottom line to what I am proposing is – we leave the EU, join the EEA and accept free movement of people between nations but not between regional authorities. We harness the power of Big Data (something the Brexit True Believers like Steve Hilton, Daniel Hannan and Michael Gove – although I doubt he has the faintest idea what that is – should be happy about in their dreams for a digital democratic 21st century nation) to be far more hands on about the movement of people within our country.

I’m thinking that National Insurance numbers should be devolved to a local level. Local communities vote on how many NI numbers they are willing to offer per year, and this should be cross checked against hiring plans, school places, available housing, NHS capacity – and plans/funding made accordingly. There will be no benefits, no school places, no jobs, no housing without an NI number.

It will need an investment in administrative resources to back this up and enforce – it will be like when the national census was first introduced in 1841. And really, the fact that we still only do a national census every 10 years a full 175 years later is quite bizarre in our rapidly changing, globalizing world.

It addresses the issue that the unexpectedly large influx of EU people into the UK since 2004 has been very unevenly distributed, particularly amongst communities that have never really recovered since the 1980s collapse of traditional industries.

It actually may turn out to be unnecessary, as I agree with Jonathan Portes at the National Institute of Economic and Social Research that we might have reached peak immigration anyway. Brexit will certainly help push this trend further. But at least it gives people a sense that they are back in control again.

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Estonia & European identity

I have been wanting to visit Estonia for a while. Although it is a tiny country, with only 1.3 million population, I knew from the research that had been done on my family history in the Baltic region that Estonia’s story would help me understand more about the development of Europe and whether there could be such a thing as a European identity or common culture.

So when I had an opportunity to visit the Estonian capital, Tallinn, for a conference recently, I made sure I had plenty of time for sightseeing. I know Japanese people often think of Europe as having a “stone culture” – buildings built to last, as opposed to buildings made of wood which can be pulled down as needed, and Estonia certainly fits that category, with plenty of beautiful churches and medieval houses built from the local limestone to visit.
However there were other aspects of Estonia which did not fit my usual concept of a European country. For example, Christianity came very late to Estonia, in the 13^th century, a thousand years after it arrived in Western Europe. It was a pagan country until it was conquered by the Northern Crusades, led by the Christian Kings of Denmark and Sweden and the Germany Livonian and Teutonic military orders (which is where my mother’s family had their roots). To this day Estonia is one of Europe’s least religious countries.

The late arrival of Christianity was partly because Estonia was never occupied by the Romans – unlike most other Western and Southern European countries. Estonia was, however, occupied by other countries for the past 700 years; Sweden, then Russia, then a brief moment of independency in the 1920 and 1930s, then Germany and then most recently by Communist Russia, when it was part of the Soviet Union.

The Russians tried to industrialise what was basically an agricultural and trading economy, setting up factories and mines, bringing in many Russians to work in them. Initially Estonia was seen as a prosperous place to emigrate to but the industrialization was not successful, and the Estonian economy suffered, particularly as its usual trade routes to the West had been cut off.

It was when I wandered around the old merchant houses of Tallinn that I felt I was in a recognisably European environment. The merchants of Tallinn were part of the Hanseatic League, a confederation of merchants and towns that stretched across many countries of Northern Europe, from the UK to Russia from the 13^th to the 17^th centuries.

Even now, with the rise of anti-European movements in the UK and the Netherlands, most people would want to stay in some kind of trade federation. The region’s history of trading and shipping, travelling and migrating around Europe and a love of doing deals with each other is still very strong. It’s an identity nobody in Europe wants to lose.

This article by Pernille Rudlin originally appeared in Japanese in the 7th November 2013 edition of Teikoku Databank News and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Top 30 Japanese companies in the UK – Brexit impact

I’d been avoiding doing a Top 30 Japanese employers in the UK ranking to accompany our Top 30 Japanese employers in Europe, as officially disclosed data per country are much harder to get hold of than regional totals. But with Brexit, more data has been disclosed about employee numbers and where there are still no data from the company itself, I took the top figure from publicly available sources.

Credit research agency Teikoku Databank, for whom I write a monthly column, estimate there are 1,380 Japanese companies with operations in the UK, with the manufacturing industry accounting for 40%. The estimate commonly used by the Japanese Embassy in the UK is that Japanese companies directly employ around 140,000 people. Our Top 30 employ nearly 100,000 of those employees, so they represent around 2/3 of the total number who are employed by Japanese companies in the UK.

Manufacturers do indeed represent more than half of the Top 30, although the largest company (12,000 employees), Fujitsu, is an IT solutions and services provider in the UK. 16 of our Top 30 companies have factories in the UK, half of which are automotive related. Automotive factories are part of a highly integrated European supply chain, both exporting a high proportion of their production to Europe and importing parts from Europe. The rest range from food processing to electronics to medical instruments. The automotive factories export more than half of their production to the rest of Europe, and also import plenty of parts from Europe for assembly.

In terms of Brexit impact, most of these companies have other factories in Europe, such as in Spain, Romania, Portugal and Poland, so my guess is that over the next few years, depending on the deal which the UK makes with Europe, some production and jobs might transfer to other locations.

The remaining companies are almost all financial services companies. Again, they all have offices elsewhere in Europe and I have already heard that some of them have opened “European Union” branches and built up capabilities in Amsterdam, for example. If the UK loses its “EU passport” to operate freely across EU financial markets, then undoubtedly more jobs will shift. In any case, just as with the manufacturers, there have been shifts eastwards of middle and back office jobs to Continental Europe, particularly Poland.

According to the Teikoku Databank, 18.7% of the 1,380 companies are wholesalers/sales operations, 17% are in the services sector, and 11.5% are financial/insurance. The biggest group (29.5%) have consolidated turnovers of between £75-£750 million/Y1bn-Y10bn/$100m-$1bn and 22.8% have turnovers of over £750m/Y1bn/$1bn, so the larger Japanese companies are well represented, in contrast to ASEAN, where most of the Japanese companies who have presence there are classified as small-medium size enterprises in Japan. 55% of the UK Japanese companies have their headquarters in Tokyo, 8.5% in Osaka and 5.9% in Kanagawa prefecture (Yokohama and Kawasaki).

But the outstanding feature of the Top 30 that most concerns me, both for my own business and for the future of the UK, is the large proportion of the Top 30 that are the product of an acquisition. Having put a stake in the ground, they may well stay in the UK despite Brexit, but will the UK really see many more major acquisitions from now on? And despite their British roots, might the European HQ gradually shift away? 21 of the Top 30 currently have their regional HQ in the UK, but I have seen many of them become more virtual and integrated in the way they manage the region, so that actual physical location is less important for management level regional executives.

Fujitsu – ICL
Sumitomo Electric Industries – Lucas
Itochu – Stapleton Tyres, Kwik-Fit
Mitsubishi Corporation – Princes Foods
Hitachi – The Railway Engineering Company, Horizon Nuclear Power
NSG – Pilkington Glass
Dentsu – Aegis
Calsonic Kansei – Llanelli Radiators, Marley Foam
Suntory – Lucozade, Ribena
Olympus – KeyMed
Mitsubishi Chemical Holding – Lucite
Mitsui Sumitomo Insurance & Aio Nissay Dowa – Amlin, Insure The Box
Sompo Holdings – Canopius

My sense is, UK based people might want to get ready to move eastwards too in the next few years, if they want to work for the Japanese Top 30. Ironically, Poland looks a good bet, the source of so much immigration to the UK recently and in the more distant past.

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Balkanizing Europe – in a good way

On the way to the stunning Krka waterfalls in Croatia, from where we staying on the Adriatic coast for our holidays last summer, our tour guide suddenly said “we are now in the Balkan part of Croatia”. The term Balkan has many resonances for Europeans who know their history. Not only is it 20 years since the war in the Balkan peninsular, but it is 100 years since WWI, which was thought to partly have been the result of “Balkanization”, whereby the countries, formerly ruled by the Ottoman Empire or the Austro-Hungarian empire, fragmented into warring states. Clearly our guide wanted us to appreciate that Croatia was not just Balkan, but also Mediterranean, and therefore part of modern Europe.

The warring Balkan states were in part reunified under the Soviet Union after WWII and most Western Europeans of my generation remember the Adriatic coast as being part of Yugoslavia, and a cheap but pleasant place to go on holiday. Yugoslavia was meant to be one of the more benign and successful Soviet satellite countries, so it was a shock to Western Europeans when it collapsed into a bloody civil war.

Croatia became the most recent member to join the European Union, in 2013. Other Balkan countries such as Former Yugoslav Republic of Macedonia, Serbia and Montenegro are official candidate countries, with Bosnia and Herzegovina being considered a “potential candidate”.

With the European Union in danger of falling apart itself, thanks to the Eurozone crisis and the UK referendum on exiting, the Balkan candidate countries must wonder what exactly the benefit of joining the EU might be. For them, the original aim of the European Union, to prevent outbreaks of further wars through economic cooperation, still has meaning, of course, given their recent history.

The benefits of economic cooperation are less obvious. It is clear from Croatia’s recent accession that joining the EU later on means missing out on the big regional business investments by multinationals. Balkan state populations and economies are relatively small, so there is not much incentive to invest substantially in opening a subsidiary in such countries – the markets could probably be easily covered through a local agent, or from a regional base in Germany or Poland.

Croatia still has a shipbuilding industry, representing 10% of its exports but clearly it has had to concede that a major economic driver is going to be tourism, as it was in the past. I saw plenty of Japanese tour groups there, and I expect, like us, they were impressed by the beauty and history of Croatia’s old towns, the delicious seafood and how clean and well looked after the streets and buildings were.

Above all what really struck me was the hardworking, efficient, polite, honest, well educated, excellent English ability and cheerful nature of all the Croatians we met. Although the Croatian market may not be attractive to foreign investment, the Croatian workforce certainly is.

I only hope that Europe can work towards a future where Balkanization has a new meaning – that people from the Balkans contribute to and benefit from the European single market – and not the old definition of a disintegration into hostile, ethnically cleansed states, yet again leading to the kind of war that the European Union was meant to prevent from ever happening again.

This article first appeared in Japanese in the Teikoku Databank News and is also in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

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