This post is also available in: Japanese
I’ve been avoiding writing about Brexit this past few months, partly because I felt I had nothing more to say. Similarly, Japanese companies have stopped issuing warnings. Many have already made and even implemented their plans for a worst-case scenario of a hard or no deal Brexit. I hear they have also been advised by the Japanese government to leave the talking to diplomats and politicians.
Companies in the UK have also gone silent. Some because they have been told by the Johnson regime that if they speak out, they will jeopardise government contracts. In financial services – Japanese firms included – alternative, approved EU entities have been set up. There is even the chance of making some money on the chaos that will probably arise in the currency, bond and stock markets.
It is still impossible to make any confident predictions about what will happen. Maybe it is true that Boris Johnson will, at the very last minute, blame the EU for not offering a fresh deal, then ask the EU for an extension to Article 50 in order to have a general election. He would be hoping to fight this on a populist campaign and win a more substantial majority. Then he can ask the EU for a new deal, confident as Mrs May was not, that he has a majority in parliament to approve it – or a no deal if the EU will not offer any concessions.
The problem is that the deal offered to Mrs May was as good as could be expected given her red lines of an end to the freedom of movement of people, no jurisdiction over the UK by the European Court of Justice and no customs union with the EU. It is hard to imagine a Johnson government erasing any of those red lines.
Johnson’s main aim appears to be to remove the Northern Ireland border “backstop” that in effect keeps Northern Ireland inside the EU if no solution to keeping the border open with the Republic of Ireland is found. Perhaps there could be a fudge whereby the backstop is removed from the Withdrawal Agreement and put into the Political Declaration – meaning it is to be negotiated later – which would probably also require a longer transition period than the current two years.
So Japanese companies in the UK may find that after a tumultuous few months, the UK remains in a transition period for several years – technically not in the EU, but all conditions remaining the same, while negotiations drag on, ending in a hard Brexit.
In which case what Japanese companies have already done remains the best solution – manufacturers adjust supply chains to circumvent the UK, financial services companies keep most of their staff in the UK but have substantial presence in the EU too. And those Japanese IT, infrastructure and outsourcing companies who have recently been investing in the UK should stay quiet, in the hope of getting government contracts to assist with whatever new systems Brexit brings.
This article by Pernille Rudlin originally appeared in Japanese in the Teikoku Databank News, 11 September 2019
For more content like this, subscribe to the free Rudlin Consulting Newsletter. 最新の在欧日系企業の状況については無料の月刊Rudlin Consulting ニューズレターにご登録ください。
