Category: Brexit

France

The clampdown on non-EU immigration by the UK government has been causing plenty of concern amongst the Japanese business community for some time now.  As we approach a general election in May 2015, the coalition government is under pressure to explain how it is going to meet its commitment to cut immigration to the UK to tens of thousands. The government can control non-EU immigration, but not the hundreds of thousands of immigrants who come from EU countries to the UK each year, because of the EU commitment to the principle of free movement of labour.  This is why Japanese companies are finding it so hard to get visas for their Japanese expatriate staff.

If the UK tries to undermine this principle of the free movement of labour within Europe, the coalition government could even find themselves having to leave the EU, as Angela Merkel has stated.  Pro Europeans and most businesspeople in the UK would rather further reforms were made to the EU, which address the causes of pan-European movements of people, but this would mean further harmonisation of business and labour regulations.  Anti Europeans are antagonistic towards any imposition of unified regulations and the unions in countries such as France or Germany would resist any reforms which would threaten protection of employment of their members, or reduce state benefits.

For example, it is estimated there are over 300,000 French people living in London, making it the sixth biggest French city in terms of population.  The usual explanation for this is that young people have found it hard to get a permanent job or start a business in France.  There are more opportunities for them in the UK.

I’ve certainly found, as I have been expanding my business in France this year, that the bureaucracy and barriers to efficiency in France are quite bewildering compared to the UK. For example, in order to sell training courses to a French company, I have to hire an agent who is a registered company in France, and also is an approved training provider.  This agent then has to provide all kinds of paperwork to the customer, so they can claim back from a state training fund the training taxes they have contributed.  This adds considerable expense and delays to my business.

A Japanese company told me recently that when they tried to acquire a French software company that was about to go bankrupt, the employees decided they would prefer the company go bankrupt even though they would lose their jobs, because then they would have 80% of their salary, benefits and even mortgages paid for the next three years.

I can see that from the French perspective these regulations and taxes can be justified as ways of creating and retaining jobs and ensuring development of skills, but in reality all it has done is deter foreign companies from making any significant investments in France.  So despite the visa difficulties, the UK is still the destination of choice in Europe, for businesses and people.

A 2017 update to this article appears here – A second look at France

This article was originally published in Japanese in the 10 December 2014 edition of the Teikoku Databank News. It 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.

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。

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British pragmatism, Scottish independence and Brexit

By the time you read this, Scotland may have chosen to become independent from the rest of Britain.  In that case, as we say in English, “the heart has ruled the head.”  The opinion polls a week before the vote show it is very close, with many undecideds – those whose heads say “no” to independence, but whose hearts are excited by “yes” to becoming a separate nation again, in charge of its own destiny, after 300 years of union with the UK.

Businesses, Scottish and English, have finally started speaking out, mostly for the “No Thanks” side of the campaign, but “no” is not very appealing word and the reasons for “no” can sound like scaremongering.   The future is uncertain for an independent Scotland. Not only will difficult negotiations start on whether and how Scotland will be able to keep the sterling pound as its currency, but also negotiations will have to begin with the European Union as to whether and how soon Scotland can become a member nation.

The UK is also less than a year away from a General Election in May 2015, which the Conservative Party is fighting on a promise of a referendum of the UK’s membership of the EU.   The UK Independence Party, which supports leaving the EU, has done very well in recent local and European elections, so it is a real possibility that if the Conservatives form the next government, the British people will vote to leave the European Union.

It must seem odd to Japanese business people that British citizens would willingly vote for actions which might undermine the political and economic stability that has made the UK such an attractive destination for foreign investment.  But it is that very history of stability that seems to give Scottish and other British people the confidence that somehow everything will be all right.  We pride ourselves on being pragmatic, and that we will somehow “muddle through”. Businesses are making contingency plans for Scottish independence and no doubt for any Brexit  too.

Edinburgh, the capital of Scotland, is the second financial city in the UK after London, but even the Royal Bank of Scotland says it is considering moving its headquarters to England if Scotland becomes independent.  The other major sector in Scotland, the oil industry, has been unnerved by threats of nationalization should the Nationalists gain power.  All sectors are worried that corporate taxes may have to rise to fund the Nationalists’ progressive policies or else that Scotland’s creditworthiness will be affected.

Unsurprisingly, Japanese companies (and other non-UK companies) have not spoken out on the issue, as this would be counterproductive, but as many Japanese banks, construction and engineering firms have invested in social infrastructure projects in Scotland and the rest of the UK, the hope must be that even if Scottish hearts win the vote for independence, the famously “canny”, rational Scottish heads will prevail afterwards and British pragmatism will also avoid too much upheaval in the coming years of renegotiations with the EU.

This article was originally published in Japanese in the Teikoku Databank News on 1 October 2014 and also appears Pernille Rudlin’s new book  “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on  Amazon.

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。

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EMEA CEMEA EMEIA – Japanese regional headquarters in Europe – scope and location

My old employer Fujitsu’s latest attempt to resolve the “European regional headquarters” conundrum that many multinationals face is to create a region called EMEIA – Europe, Middle East, India and Africa.  This is partly a reflection of the IT industry (having large outsourcing desktop support operations in India, which in Fujitsu’s case had actually been managed out of the USA operation previously) and also the legacy of the former Fujitsu Siemens global HQ in Germany selling hardware into India.

The EMEIA region will be headed up by Duncan Tait, CEO of Fujitsu UK & Ireland, who has also been made Corporate Senior Vice President in Fujitsu HQ’s new global matrix structure, so this represents a tipping of power back to the UK, having tipped over to Germany previously, with the previous tripartite European structure of C(ontinental) EMEA, UK & Ireland and the Nordics.

I had mentioned previously that there seemed to be a shift towards Japanese companies basing their European or EMEA headquarters in the UK.  Some say this could be due to the relative tax structures in the UK being more favourable now than the Netherlands or Germany.  My view is that Japanese companies are not quite as hard headed as that, and it is more to do with the favourable business climate (diverse, flexible workforce) and global infrastructure and support services that the UK offers.

I have big worries, therefore, on how any British exit from the EU might ultimately impact Japan’s investment in the UK.  UKIP leader Nigel Farage and the Labour Party’s shadow chancellor Ed Balls recently had an exchange on this, with Farage (rightly alas) pointing out that Nissan were very negative on the impact of the UK not joining the euro and yet their factory is still in Sunderland.

For sure, Nissan will not be closing that factory down any time soon – it’s too efficient and the UK market is too important for that.  But what I would be worried about if I was in government would be the more hidden ripple effect of headquarter location. It is true for all industries, not just the automotive industry, that the location of a major company’s regional headquarters will also affect its procurement, marketing, financing behaviours and therefore the suppliers around it.  Furthermore, the roles needed to run these consolidated functions are the most senior and well paid jobs in an organisation.  The economic impact is therefore not just about the size of the directly employed workforce in a factory.  If the UK were no longer in the EU, I wonder whether we might not see a slow drift of headquarter functions, and supporting services and people, back to Germany or the Netherlands or Belgium.

Nissan’s European HQ is actually in Switzerland – unusually for a Japanese company – 18 out of the Top 30 Japanese employers in Europe have their regional headquarters or part of their regional headquarters in the UK.  Official location may be only half the story however – I know that many Japanese companies are moving towards a more “virtual” regional structure, with top jobs and functions located across Europe.  I will examine this further in future postings.

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。

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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.

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。

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