(This article was first published in Japanese in the Teikoku Databank News in July 2021)
It has been six months since the UK left the EU and the transition period ended. According to my research and also a recent survey compiled by METI and MUFJ Research, the impact on Japanese companies in the UK has not been as severe as many were expecting.
This is partly because Japanese companies have been thorough in their preparations for a worst-case scenario over the five years since the 2016 referendum. The METI survey points out that larger (over Y10bn/$90m revenue companies, which is around 60% of the Japanese companies in the UK) are more positive about further expansion in the UK than smaller ones. They have had the resources and the networks to stockpile, set up logistics and warehousing on the continent and bear the costs of increased paperwork at the customs borders. They still see the UK as an important market and a useful base for regional coordination across Europe, Middle East and Africa.
Even amongst the larger companies, however, there is some diversion in views. The METI survey summarises the Japanese automotive companies as viewing the outlook for the UK market as bleak whereas chemicals, pharmaceuticals, foods and electrical machinery manufacturers are more positive. This diversion is clear in the employee totals – Nissan has 11% fewer employees year ending 2020 compared to a year previously. Honda is closing its UK plant in July and its employee numbers were 14% down in the year ending 2020 compared to the year before. Other double digit falls in UK employee numbers were Nomura and Konica Minolta.
It is becoming increasingly difficult to be accurate about employee trends, however, as one impact of Brexit has been that some of the larger companies such as Sony and Panasonic have moved their incorporated European subsidiaries to the Netherlands and Germany. The UK operations are now branches, so do not have to file their full accounts, including employee numbers, with Companies House.
Many of the financial services companies such as Mizuho and MUFG were branches of Japan or a European subsidiary anyway, and several others have moved to this model, as well as opened up subsidiaries on the continent, to ensure they are still approved to offer financial services in the EU. The EU has indicated it may put further pressure on financial services companies to move decision making and client facing personnel to the EU.
The UK is increasingly a services sector economy, and this shows in the Japanese companies where employment is growing – NTT, who have moved their global headquarters to London and Outsourcing, who continue to acquire recruitment companies across Europe.
According to METI’s survey, the reasons for choosing to continue to expand in the UK were the ability to use English, the presence of other multinationals and a transparent legal system. It would seem that the UK is still going to be the base for coordinating an increasingly dispersed network of people and businesses across the region.
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