Brexit

Top 30 Japanese Employers in the Netherlands 2021

There’s no doubt the Netherlands has done well from Brexit in terms of Japanese investment into Europe. Its strong services sector has made it a useful alternative regional coordination hub to London and there is a longstanding thriving Japanese community in the Amsterdam area. Both the numbers of Japanese nationals living in the Netherlands and the numbers of Japanese companies in the Netherlands have shot up the past few years, in contrast to a clear decline in Japanese companies in the UK, and a rather more bumpy but downward trend in Japanese nationals in the UK. There have also been some significant acquisitions of Dutch companies by Japanese companies since 2016.

The number of Japanese companies in Germany, the largest host in Europe, has also grown steadily over the past few years, making the sudden rise in Japanese companies in the Netherlands and Italy in the past two years look somewhat anomalous. The Ministry of Foreign Affairs (MoFA) does not explain what caused this sudden leap but they are sticking to their guns with the recent release of the data for 2020.

Cross referencing the MoFA data with the Toyo Keizai directory and our own desk research, we think the sudden jump in the number of Japanese companies in the Netherlands and Italy are probably to do with the recent acquisitions – perhaps Outsourcing acquiring Netherlands headquartered Otto Work Force in 2018, supplemented by Mitsubishi Corporation acquiring Dutch energy company ENECO in 2020. In the case of Italy, it could be due to Hitachi acquiring various companies from Ansaldo STS.

Our database contains 352 Japanese companies in Italy, sitting neatly betwen the 415 registered by MoFA and the 269 recorded in the Toyo Keizai directory. But our estimate of 503 Japanese companies in the Netherlands is lower than both the 525 in the Toyo Keizai and the 639 in MoFA’s records. We only enter companies which we can verify have employees into our database, which is why we appear to have under-recorded the number. Many of the companies identified by Toyo Keizai and presumably MoFA are brass plate, holding company type entities. As was seen in the acquisition of Otto Work Force, even one company in the Netherlands turns out to have multiple legal entities attached to it – at least 9 different subsidiaries are associated with Otto Work Force in the Netherlands. According to Dun & Bradstreet, Outsourcing’s holding company in the Netherlands now has over 50 companies associated with it.

Some of the Netherlands based companies we have not recorded may well have employees, but it seems Dutch companies are not obliged to disclose as much information as similar companies in the UK, for example – where employee numbers, even for the smallest company, are disclosed and freely available on Companies House.

Bearing the lack of data in mind, our Top 30 Japanese companies in the Netherlands needs to be treated with caution, but we can certainly see that Outsourcing and Mitsubishi Corporation‘s recent acquisitions have pushed them into the Top 30. Recruit, another major Japanese recruitment company, also entered the Top 30 with its acquisition of USG People in 2015 and Orix, the Japanese financial services company, acquired Dutch asset manager Robeco in 2013.

As these acquisitions show, Japanese companies have mainly been investing in the Netherlands’ services sector. There are some companies with manufacturing operations such as Omron, making control equipment, factory automation systems, electronic components, automotive electronics, ticket vending machines and medical equipment. Toyota Industries entered the Top 30 with its acquisition of materials handling systems manufacturer Vanderlande in 2017 and Canon manufactures printing production systems, as one of its legacies of acquring Oce more than ten years ago. Other major manufacturers are Astellas (pharmaceuticals) and Teijin (fiber). The notable absences from the Top 30 in terms of manufacturing are from the automotive sector – no Japanese car companies have plants in the Netherlands, and as a consequence, none of their suppliers do either.

The 30,000 employees who work for the Top 30 largest Japanese employers in the Netherlands represent around 70% of the total number of Netherlands based employees working in Japanese companies. This puts the Netherlands in equal 7th place with the Czech Republic in terms of largest numbers of employees in Europe, after Germany, UK, France, Poland, Italy and Spain. As the Netherlands is host to the fifth largest number of Japanese nationals and fourth largest number of Japanese companies, this is a further indication that the Netherlands has relatively few manufacturers with large numbers of employees and rather more in the way of holding companies with no employees, and a relatively higher density of Japanese expatriates compared to some other European countries.

See our 2022 top 30 Japanese employers for the Netherlands for updates.

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Trends in Japanese companies and Japanese nationals in Europe in 2020 – did the pandemic have any impact?

The number of Japanese nationals resident in Western Europe had grown steadily over the past seven years to reach over 220,000 by 2019. But by October 2020, according to Japan’s Ministry of Foreign Affairs, that number had dropped 5% to around 212,000. Of course the pandemic may have been an influence on this, evidenced by the fact that the number of Japanese residents overseas fell consistently around the world, with a global decline of 3.7% from October 2019 to 2020. But the latest statistics also show that some longer term trends continue and that the UK, while dominant as a host of Japanese companies and nationals, is also something of an outlier.

I’m surprised the numbers only fell 5% in Western Europe, as anecdotally I had heard of Japanese managers who were supposed to be moving to Europe staying in Japan, and ending up doing European working hours, trying to do their coordination job in a Japanese time zone. I have a sinking feeling they were also glued to their laptops during Japanese working hours too.

The fall in numbers of Japanese nationals resident in the UK had been a long term trend since 2015, but had shot back up in 2019. Since Japan’s Ministry of Foreign Affairs stopped giving breakdowns by visa category in 2017, it’s hard to work out what was behind this decline. It seems likely as I mentioned in previous posts, that it was more to do with how student visas were classified, with a secondary impact of Brexit on corporate expatriation to the UK.

The number of Japanese nationals in the UK fell 5%, the Western European average, from October 2019 to October 2020, compared to an 6.7% drop for Germany and an 8.4% drop for France. The UK is still the biggest host of Japanese nationals in Europe, with 63,000, compared to Germany with 42,000 and France with 31,000.

The Nordics buck the trend?

Some European countries hosted more Japanese nationals in 2020 compared to 2019 – mostly the Nordics – Finland, Norway, Denmark – and Austria. If this was anything to do with which countries were safer in the pandemic, this must have been more to do with perception than reality, as no country in Europe had been particularly badly affected until November 2020, just after the statistics were collated.

As the Financial Times charts show, in the winter of 2020, UK, Austria and Denmark all had a higher number of cases and the UK and Austria had a higher number of deaths than the European Union average. But it does seem that Norway and Finland were good choices in terms of staying healthy.

The rising phenomenon of non-resident Japanese directors

I’ve also seen a rise in Japanese directors of UK companies, who used to be resident in the UK, now being resident in the Netherlands. Although the Netherlands is still a much smaller host of Japanese nationals than the UK, Germany or France, the trend for Japanese nationals resident there is strongly upwards, with only a slight (-1%) downward turn in 2020.

Maybe the trends and impact of coronavirus will become clearer when the statistics for October 2021 are published in autumn of next year. It may turn out that COVID-19 accelerated trends that were already there, of consolidating and reducing the number of Japanese corporate expatriates, as Japanese directors and managers of UK and other European Japanese companies decided that they can manage their European subsidiaries remotely.

Turning to the statistics for Japanese companies in Europe, the rise in the number of Japanese nationals in Netherlands clearly has something to do with the numbers of Japanese companies in the Netherlands shooting up these past two years. I had previously speculated as to what was the cause of the sudden rise in Japanese companies in the Netherlands and also Italy. Both have continued at that level for 2020, so it was clearly not a glitch and more a rebasing or redefinition of what counted as a Japanese company as there is no evidence that a sudden jump in the number of new Japanese entrants happened in either country.

The UK managed to claw back some of the 12% decline in the number of Japanese companies it hosts since 2012, but is the only country in Europe, along with Belgium, to show a decline over the 9 years, when the numbers rose 23% on average for the whole of Europe. As we have outlined before, this decline is less about a complete withdrawal from the UK, and more about some long overdue tidying and consolidation, accelerated by Brexit, of shifting European regional bases to the continent and turning UK subsidiaries into branches.

Pernille Rudlin on the Japan By River Cruise podcast

Pernille Rudlin was the guest on the Japan By River Cruise podcast, hosted by gaijin tarento (foreign celebrities) Bobby Judo (living in Fukuoka) and Ollie Horn (a stand up comedian now based in Bristol, UK).

Pernille talks about her early experiences living in Japan as a child, the current state of UK Japan trade and how where she currently lives, Norwich, is connected to the RingerHut chain of Nagasaki Chinese noodle restaurants via Norwich native and Victorian merchant Frederick Ringer.

Japanese companies’ preparations for Brexit pay off

I was relieved to see that the prediction I made in September 2019 that Japanese companies would be well prepared for a hard Brexit has proved to be correct. I would imagine Japanese logistics companies had a large part to play in this.

Japanese car manufacturers have had to halt production in the UK, but this has been more to do with the impact of coronavirus and a shortage of semiconductors than any Brexit related problems.

According to a JETRO survey at the end of last year, the main countermeasure adopted by Japanese manufacturers in the UK to cope with a hard Brexit was to stockpile. Other British companies have stockpiled too, and as a consequence there have not been as many trucks backing up in the UK or France as was feared. But I suspect Japanese companies have also faced few problems because many have adopted the second most popular countermeasure chosen by Japanese manufacturers in the JETRO survey – to reconfigure their supply chains. I estimate at least 30 Japanese companies in the UK have moved their EU supply hubs to the continent over the past few years.

The companies who are suffering the most from Brexit are those smaller British companies who are reliant on supplying EU countries. Up until now they had been able to ship small quantities to EU based customers cost effectively, without any worries about certifications or customs clearance.

Now they have to fill in all kinds of forms and if they are supplying food or livestock, they need health and hygiene certification. Some European logistics companies are refusing to supply the EU from the UK because they cannot cope with the paperwork. They also do not want to send trucks with imports into the UK if they cannot find a load to take back to the EU to justify the expense.

This may all resolve itself eventually, but I suspect that many of the measures that Japanese companies have taken are not temporary and reflect long term trends, as well as the impact of Brexit. For example, the number of Japanese companies manufacturing in the UK has fallen by 22% since 2014, according to Ministry of Foreign Affairs data. This is greater than the 11% overall drop in Japanese companies in the UK. Many of them have converted to sales companies and others have become branches of EU parent companies. As a consequence, there has been a 31% increase in the number of branches in the UK, and a 16% drop in the number of incorporated subsidiaries. Companies who have converted to branches include financial services companies ensuring they can continue to trade in the EU.

Japanese companies are continuing to start up in the UK, but they are mostly in the energy and lifestyle sectors, which are very domestic in orientation. Japanese logistics companies may find that their expertise in international goods trade is more in demand from British companies than Japanese companies in the UK from now on.

This article originally appeared in Japanese in the Teikoku Databank News in March 2021

Pernille Rudlin interviewed on the history of Japanese companies in the UK and Brexit

Pernille Rudlin is in conversation with Tom Hayes of BEERG (Brussels European Employee Relations Group) on how Japanese companies have responded to Brexit, tracing the progress of UK/EU/Japanese trade relations from Margaret Thatcher’s promotion of Britain as a Japanese gateway to the EU in the early 1980’s, through to the present day.

The video and podcast links are as below

BEERG Byte #32 from Derek Mooney on Vimeo.

Latest Top 30 Japanese companies in UK shows significant divergence

Our latest Top 30 Japanese companies in the UK shows a 1.3% drop overall in employee numbers from 2019 to 2020*, the first fall we have seen in the seven years we have been tracking the Top 30. As most Japanese companies in the UK use an April 1 to March 31 financial year, the fall in employee numbers dates to before COVID-19 pandemic began to have an impact. The small drop masks significant divergences – there were companies whose workforce shrank by over 10% such as Nissan, Honda and Nomura, and also companies which grew significantly, such as NTT and SoftBank.

This tallies with a recent report from Japan’s Ministry of Economy, Trade and Industry (METI) which reported in March 2021 that whereas automotive sector companies have a bleak outlook on the UK market, manufacturers in sectors such as chemicals, pharmaceuticals, electrical machinery and foods are far more positive about future expansion in the UK. According to METI, manufacturers represent around 39% of Japanese companies in the UK, the remainder being in the services and wholesale sectors. Services sectors, particularly IT related, would seem to be positive too from our researches, apart from Fujitsu, which has slipped down a further place to being the 4th largest Japanese employer in the UK, having been the largest for many years previously, to 2017/8.

The 96,000 who work for the Top 30 Japanese companies in the UK represent around 55% of the 176,000 (down from 179,000 the previous year) or so people who work for over a 1,000 Japanese companies in the UK, according to our estimates. The METI survey shows that despite the small drop in the numbers employed by the Top 30, larger companies (defined by METI as having over £600m turnover) will have weathered Brexit far more easily than smaller ones, having the resources and networks to set up agents in the EU, stockpile and open up new logistics and warehousing hubs on the Continent.

Certainly the 50 or so Japanese companies that have withdrawn from the UK over 2019-20 have been smaller in size (under 50 employees) and the larger ones who have shut down operations have usually not withdrawn entirely but rather turned their subsidiaries into branches or merged them with another UK based operation.

As we have said for some years now, Brexit has brought about an acceleration of trends which were happening anyway, and precipitated some long overdue tidying up.

FREE PDF DOWNLOAD OF TOP 30 JAPANESE EMPLOYERS IN THE UK 2021

*2020 defined as the year ending 2020, where most of the year was in 2019, ie April 2019 to March 2020 or January 2019 to December 2019.

Japanese companies in the UK are shrinking – is Brexit to blame?

The number of Japanese companies and their employees in the UK is starting to decline. Given that this is against the trend elsewhere in Europe, it is hard to avoid the conclusion that this is a reaction to Brexit.

Brexit has put up barriers to the UK trading within the Single Market, damaging sectors it used to have a comparative advantage in such as automotive manufacturing and financial services. The UK is now left with its global strength in services such as professional services, IT, design, marketing and education. It remains to be seen how much of this strength was also reliant on being part of the Single Market, in terms of being able to sell those services to the EU and benefit from the freedom of movement of the people providing or benefiting from those services. So far, Japanese companies seem to be happy to continue to access these services by basing their regional head offices in the UK, regardless of Brexit, or through acquiring British companies in the services sector.

The decline is from a high base. The UK has the highest stock of Japanese foreign direct investment, the highest number of employees of Japanese companies, and the most resident Japanese nationals in Europe.

The decline in numbers of Japanese companies in the UK is mainly due to a reduction in Japanese companies in the manufacturing and financial sectors. There has also been a drop in the number employed in automotive manufacturing. On top of this, the main driver of the past few years behind the rising employee and company numbers – big-ticket M&As followed by expansion in employee numbers – has been less of a force more recently.

To understand more about the trends in Japanese companies in the UK in terms of investment and employee numbers, how this compares with Germany, France, the Netherlands and Italy and what this might mean for the UK in future years, please download our report below:

Japanese companies in the UK

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Authenticity and food

I often ask participants in my cross-cultural training sessions what symbolises home to them. This acts as an ice breaker and allows them to talk about their diverse cultural backgrounds – their Guyanese mother’s curry or Moroccan grandmother’s tagines, even if their own nationality is New Zealander or French.

At a recent session, the Japanese participant said ramen most reminded him of home. We agreed that although it is possible to buy ramen and make it in the UK, ramen at a yatai – in Japan – was what he really meant.

The ramen you can buy in England is made by Nissin, but manufactured in Hungary. I also checked the udon brands available online at Sainsbury’s – one of the UK’s biggest supermarket chains – three were made in China and one in Thailand.

Japanese food is so popular in the UK, there was a Japanese themed week in the current TV series of Great British Bake Off – where someone made a matcha cake and another chef used soy sauce in their cooking.

This caused a controversy on Twitter because the Department for International Trade used the programme as an opportunity to claim that soy sauce would be cheaper in the UK thanks to the UK-Japan Comprehensive Economic Partnership Agreement. It turned out, however, that Japan-made soy sauce would only be cheaper in the sense that without the UK-Japan deal, the WTO tariff of 6% would have applied. Now that there is a UK-Japan trade deal, there will be a 0% tariff, as there was between the EU and Japan anyway.

In fact, a large proportion of UK imports of soy sauce comes from the Netherlands – Kikkoman has a factory there – or from Poland, where Associated British Foods brand Blue Dragon has a factory. If there is no UK-EU trade deal, these will be 6% more expensive. Soy sauce from other countries such as China and Malaysia will be cheaper even with a 6% tariff, as previously they attracted the 7.7% EU tariff.

There is a manufacturer of soy sauce in the UK too – Shoda Shoyu acquired a British company Speciality Sauces, with a factory in Wales, in 2000, where they also make miso and mirin.

There are plenty of food snobs in Europe who claim that only soy sauce made in Japan tastes truly authentic, but obviously for every day cooking of the hybrid culture kind that British enjoy, cost performance is important too.

Europeans, including the British, are keen to impose “Geographic Indicators” in their trade deals – that Parma ham must come from Parma, Champagne from Champagne, Stilton cheese from Stilton. But for many of these items, like ramen at a yatai, it is not just the location of manufacture, but the location of consumption that makes it a truly authentic, delicious experience – the atmosphere, the climate, the other food. I did not really appreciate the taste of Guinness until I drank it in a pub by the sea in Ireland, with soda bread, butter and mussels.

This article was originally published in Japanese in the Teikoku Databank News on 2nd December 2020

Japanese companies in Ireland

I have been visiting Ireland about once a year recently for business, but also for family reasons. The business side is to provide training for companies there that have been acquired by a Japanese company, or in one case, had acquired a company in Japan via its US parent.

My parents also now live in Ireland. After 25 years’ working in Japan, they initially retired to France but never felt completely at home there. My stepfather’s father was Irish, so he has family in Ireland. It was also easy for my stepfather to get an Irish passport, as an insurance against Brexit so that he can continue to receive free healthcare and a state pension. My mother has become Danish for the same reason – and was able to do so because her father was Danish.

They now live close to my cousins, near the city of Cork, which has become a hotspot for technology companies, particularly American ones. Trend Micro and Alps have factories there, with the latter employing around 850 people making electronic components.

Cork also has a pharmaceuticals and biotech cluster, as does the capital of Ireland, Dublin, which is where Astellas and Takeda* have plants. Astellas employs over 400 people manufacturing raw materials and immunosuppressants and Takeda employs around 300 people making cancer therapies and active ingredients for various drugs. Ireland is the biggest net exporter of pharmaceuticals to the EU.

Multinationals are attracted to Ireland because of the young, well-educated, English speaking workforce, and also the very low corporate tax rate of 12.5%.

Aircraft leasing in particular has benefitted from Ireland’s low tax policies. Nine out of the ten top aircraft lessors are based in Ireland, and over half the world’s airplanes are owned and managed there. Japanese companies such as Orix Aviation and SMBC Aviation Capital have substantial operations in Dublin.

Locating operations in Ireland purely for tax reasons may turn out to be unsustainable in the long term however, as the EU, the OECD and Japan are all taking steps towards international tax cooperation and clamping down on tax avoidance.

The other risk to consider is of course Brexit. The UK forms a “land bridge” to the EU for Ireland. Around 85% of Ireland’s freight trade goes to British ports, and about 40% (around 190,000 freight containers a year) of that is re-exported to elsewhere in the EU.

Pharmaceuticals and electronic components are often shipped by air and various EU shipping companies have started up new routes connecting Ireland to the EU recently. So the main concern is any friction caused to trade that is only between the UK and Ireland.

This is partly why the land border between Northern Ireland and the Republic of Ireland has become the key issue for resolving Brexit. But the most important concern has nothing to do with business – there are many more families like mine, living in both countries, who do not want to lose the peaceful coexistence that the open border has brought with it.

This article by Pernille Rudlin was originally published in Japanese in the Teikoku Databank News on November 13 2019

*Takeda acquired Shire for $62bn in 2019, who relocated their HQ from the UK to Ireland in 2008 for tax reason. Takeda is now liquidating Shire Holdings in Ireland and transferring the assets to Takeda Ireland, to make repatriation of dividends to Japan easier – presumably avoiding Japan’s tax haven laws.

Video: the Brexit agreement one month on

Pernille Rudlin, Managing Director of Rudlin Consulting and David Henig, Director, UK Trade Policy Project at European Centre for International Political Economy participated in a Japan Society webinar on February 4th 2021, talking and answering questions about the Brexit agreement one month on, the impact on Japanese companies in the UK so far and what the future might hold. A video of the whole session is available below:

Category: Brexit