Brexit

UK may drive away Japanese firms if it tries to “be like Norway”

It is likely there will be a referendum in 2016 on whether the UK retains its membership of the European Union or leaves. Charles Grant, of the Centre for European Reform, when he spoke to the Japanese Chamber of Commerce and Industry in the UK this year, predicted that the referendum would result in a vote for the UK to break away.

The British pro-European campaign is not as well funded as the anti-European campaign, and there are plenty of Euro-sceptic politicians of all political persuasions.  The British media is also mainly prejudiced against Europe in its coverage.

The arguments for the UK staying in the EU are mostly technical, to do with foreign direct investment and the economic impact, whereas the anti-European campaign can make an emotional appeal, by invoking threats to national sovereignty.

British business people may be generally in favour of continuing as members but I agree with Charles Grant that there is a lack of enthusiasm, and a certain complacency about what will happen if the UK does leave.  British businesses think the UK can be like Norway –  prosperous, part of some kind of free trade area, but independent.  In actual fact, Norway is not as immune as it may seem from EU policies, and yet has no influence over setting those policies.

From my Japanese business perspective, “being like Norway” would be disastrous for the UK.  I have seen a slow trend towards consolidation across Europe over the past ten years amongst my seventy or so Japanese clients, with the UK playing an important role as the coordinating European headquarters, drawing on a pool of talented Europeans who can easily move to and from the UK thanks to the open borders within the European Union, either working for the headquarters itself or for professional support services such as lawyers, accountants and consultants.

Japanese companies now employ 437,000 people across Europe, according to JETRO, and the UK is by far the biggest beneficiary, with over 140,000 employees of Japanese companies, compared to Germany with 59,000.  Germany still has a strong attraction for Japanese multinationals, however, particularly those which are more engineering oriented.  If the UK shut its borders and stopped being an influence in the EU, it’s not hard to imagine Japanese companies shifting their European headquarter functions over to Munich or Düsseldorf – or Amsterdam.

All the Japanese business people resident in the UK with whom I have spoken want Britain to stay in the European Union.  However, they are afraid to speak out, for fear that this would seem like foreigners trying to interfere in domestic politics.  It is going to be up to British businesspeople like me, whose companies are active across the European Union, to make the case.  It cannot just be about jobs for the UK, but also Britain’s image globally, and how it will be damaged by “Little Englander” isolationism.  If we do not seem to want to play our part in globalisation, to be influential and proactive, the global players will take their ball elsewhere.

This article was originally published in September 2013 in the Nikkei Weekly. It also appears in Pernille Rudlin’s latest book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

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