Japanese business in Europe

Profitability of Japanese companies in the UK lags rest of EU, pessimistic about 2018

The lag between the UK’s growth rate and the rest of the world noted by Christine Lagarde today has also been felt by Japanese companies in the UK. According to the recently published JETRO survey on business conditions of Japanese companies in Europe, whereas the percentage of Japanese companies in the EU reporting profitability has increased year on year, reaching 75% overall this year, this breaks down into 71.6% for UK companies and 76.6% for other EU countries. This might only be a 5% gap, but business sentiment is also taking a hit – with the UK coming second from bottom amongst EU countries in terms of expectations of profit growth for 2017-8, beaten only by the Czech Republic.

As for Brexit contengency plans, of the 952 responses received, 245 were from UK based companies. Around 25% of these said they were currently reviewing or considering a review of their location in the UK. Of these, 60% are reviewing the relocation of their sales functions, and 50% looking to review the location of their regional headquarters functions and 20% are looking to relocate manufacturing. Over 80% said they were preparing or considering preparing to partly relocate to another EU country, and 20% were looking to completely relocate. The top 2 countries cited as potential relocation destinations were Germany (23 responses) and the Netherlands (6 responses).

Nearly half of UK based Japanese companies were expecting a negative impact on their business from Brexit, citing customs tariffs, securing human resources and changes to regulations and legislation as their main areas of concern.

On a more positive note, the new Economic Partnership Agreement between Japan and the EU is seen as being a major advantage for their business by over half the respondents, particularly for companies based in Central and Eastern Europe. Even UK based Japanese companies did not see as much merit in a UK-Japan EPA however. The most selected reason for welcoming the EU-Japan EPA was “tariff reduction or abolition for imports from Japan” – which is mostly in the automotive sector, so I guess this means more imports to Central and Eastern Europe of Japanese cars and automotive components can be expected.

The biggest operational challenge was seen as securing human resources – for more than half of the companies based in Germany, the UK, the Netherlands and Central and Eastern Europe, again echoing recent news about labour shortages in the UK – both in terms of skills and incoming EU migration. Labour shortages outstripped last year’s biggest operational challenge of “European political and social conditions” – but the latter challenge did not fade away and in fact concerns strengthened slightly, thanks to worries in Spain regarding Catalonian independence, and in the UK regarding Brexit negotiations.

Over half of respondents expected to expand their business, over 70% in the case of Japanese companies in Italy and Poland. So, happy days if you’re an automotive sector worker in Poland.

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。

Japanese companies should put their hard Brexit contingency plans into action now

“Don’t give up on expressing your concerns to the British government, but also start putting your contingency plans into action now” was the response from Haruki Hayashi, CEO of Europe & Africa for Mitsubishi Corporation to a question at the end of a lunch seminar in London I attended earlier this month, along with 150 mostly Japanese business people. The question had been “if we won’t know until October 2018 the likely shape of the agreement between the UK and the EU, won’t it be too late to put our contingency plans into action by then, in time for March 2019?”.

To another question regarding the possibility of a second referendum, Hayashi responded – “however desirable, might it not have the same result? And aren’t the British too proud to have a second referendum?”

Hayashi’s speech was a geo-political, economic and risk analysis of the impact of Brexit. He started by hinting that the meeting between Ambassador to the UK Tsuruoka (who was present at the lunch) and the Japanese Chamber of Commerce and Industry in the UK (JCCI UK) that morning had been encouraging – that the ambassador said Theresa May’s visit to Japan had been fruitful in the sense of being a reaffirmation of a common vision on security, economic issues and global partnership and also that there was clear agreement that the EU Japan agreement would be the basis for a quick agreement between UK and Japan.

But then he shared a classic Mitsubishi Corporation political (including security, business environment) risk versus economic impact matrix, plotting the key countries in the EU along with Japan. Unsurprisingly, he predicted the UK economic impact to decline and political risk to increase from its current position clustered with France, Germany, Japan, Italy, Spain and Poland.

“London is the UK”- and up until now, the UK was the EU for Japanese expats

Nonetheless, from Japan’s perspective, the UK is currently so dominant in terms of Japanese presence in the EU, it will take a while for this to unwind. I hadn’t realised quite how dominant in terms of where Japanese themselves are located – there are around 207,000 Japanese living in the EU, and around a third of those are in the UK, with 90% of those in England and over half in London. “London is the UK for Japanese” said Hayashi. There are around 1000 Japanese companies in the UK, around a third of them are members of the JCCI UK. This represents 15% of the 6465 Japanese companies in the EU, which is not far from the 16% of EU GDP that the UK economy represents or the 13% of the population of the EU that the UK represents.

But as I have blogged elsewhere, it is the size and function of these Japanese companies, and also I now realise the density of the Japanese expatriates in them, which is where the UK has been dominant – many of the Japanese companies in the UK are the regional headquarters, and most of their Japanese expatriates are located there.

The UK also took the lion’s share of Japanese investment into the UK. Hayashi pointed out here was a big increase in Japanese acquisitions in the UK from 2010, particularly in 2016, with Mitsui Sumitomo Insurance acquiring Amlin and Softbank acquiring ARM (although I see the latter as an investment rather than an acquisition in the sense of integrating or accessing a market).

Japan’s soft power – more British visit Japan than Japanese visit the UK

Japan’s soft power in the UK is very apparent too – Hayashi listed up all the British brands that aren’t Japanese, but are Japanese influenced, like Yo! Sushi, Wagamama, Wasabi, Itsu and Superdry. And I can testify to his point that the Mitsubishi Corporation sponsored Hokusai exhibition at the British Museum was completely sold out. More British people now visit Japan than Japanese visit the UK – the cross over being in 2011 – 292,000 visited Japan last year, 75% of whom were tourists, whereas Japanese visitors have been at a fairly stable 220,000 to 240,000 a year to the UK. And British tourists spend more than Chinese tourists – because they stay longer and spend more on accommodation.

Japan’s voice is being heard more than a few years’ ago

Hayashi pointed out how the share of global GDP has shifted over the decades from the traditional West to China and India, and that EU integration seems to be losing pace. Japan can take leadership, to continue to support globalization and rebuild it to include China and Russia. Hayashi says he was initially rather embarrassed at the coverage his comments about Brexit got in the Guardian newspaper, but now he thinks it was fair, and that as British people do read the newspapers, it’s important for Japanese companies to have their voices heard in the media – for which they need to have a focused message. “Write to UK ministers about your concerns. Don’t give up. Start now”.

Pernille Rudlin interviewed by BBC on UK trade delegation to Japan and Brexit

Pernille Rudlin is interviewed by BBC World Service Business Matters on Theresa May’s trade delegation visit to Japan and the likelihood of being able to get any kind of commitment to a trade deal. You can hear it or download it here There’s a clip in the introductory news headlines and the actual piece starts 6 mins 38 seconds in on the podcast, 3 minutes 50 seconds in if you are listening to the streaming version.

Japanese overseas subsidiaries in Europe: M&A boom equals more employees, less capital investment?

Recent statistics on Japanese companies’ activities in Europe show an overall positive picture – growth in employee numbers but declines in capital investment. Could this be a reflection of the ongoing Japanese overseas acquisition boom?

Sales of Japanese overseas subsidiaries in the 1st quarter of 2017 were up 7.9% overall on the previous year and at similar levels in Europe, but growth in North America was 4.3% up on the previous year. Asia represents nearly 50% of Japanese subsidiaries abroad, and sales grew 8.8% on the previous year, according to figures from Japan’s Ministry of Economy Trade, and Industry.

However capital investment declined again, by 13.6% (12 consecutive quarters of decreases) particularly in Europe (40.9% decline – the first decrease in 5 quarters) and ASEAN countries. Capital investment in North America was only down 0.8% but even this was the first decrease for three quarters.

Nonetheless, the number of employees increased 1.9% globally, and by 4.9% in Europe, the 15th consecutive quarterly increase. Growth was less in Asia (1.3%) and North America 2.9%).

This may reflect a long term shift of Japanese companies in Europe towards more service oriented, and therefore people intensive businesses, away from capital intensive manufacturing.

However, figures from the Japan Automobile Manufacturers’ Association show that automakers in Europe are still expanding production (by 7%), although below the peak levels of 2007 and 2008. 17% more cars were imported from Japan than the previous year, but Japanese car manufacturers also purchased record numbers of EU made components.

Exports of Japanese cars manufactured in Europe fell 17%, representing around 20% of Japanese production in Europe. These exports went (in order of size) to North America (24%), Latin America (10%), Middle East (10%), Africa (8%), Oceania (8%) and Asia (6%) – presumably including Japan, and the Honda Civic that Boris Johnson drove when he recently visited Japan, citing it as an example of “fantastic” British exports to Japan.

Japanese car manufacturers now operate 14 plants in seven EU countries – 4 in the UK, 3 in Spain, 2 in Portugal, 2 in Poland, 1 in Hungary, 1 in France and 1 in the Czech Republic. The major capital investments in 2016 were made by Nissan in the UK and Spain and Toyota in Poland.

Size matters when choosing a Japanese company

Whether you’re looking to work for or supply to a Japanese company, size matters. The most obvious reason being, as bank robber Willie Sutton apparently never said, “that’s where the money is”. That’s why we started our Top 30 Japanese Employers rankings – we’ve found them useful in understanding our customer base and the likely concerns of participants in our seminars.

We use the number of employees as a proxy for size rather than turnover or profit, and although there is a degree of correlation between employee numbers globally and in Europe and overall profit, there are some exceptions.

Toyo Keizai have recently listed up the companies* who made the biggest cumulative profit in the past 10 years and it’s absolutely no surprise that Toyota, one of the biggest companies in Japan and #9 amongst Japanese companies in Europe, made a whopping Y11 trillion ($99bn) cumulative profit from 2007 to 2017, far outstripping NTT and NTT Docomo at #2 and #3 who made less than half that amount. NTT and NTT Docomo are not in our Top 30 Japanese companies in Europe, although another group company, NTT Data, is.

However NTT and NTT Docomo never made a loss, whereas Toyota did go into the red – with a loss of $.8.6bn in 2008/9. Honda, who has had a tough time in Europe (and is #23 in our rankings), has also never made a loss, and accumulated a $36bn profit over the decade. Nissan, who made a loss but was famously turned round by Carlos Ghosn, is 10th largest in Europe in our rankings and has the 6th largest cumulative profit.

I was surprised to see my old employer Mitsubishi Corporation at #5, as they too had some rough patches particularly with losses in the commodity side, but clearly overall the Japanese trading companies have been very profitable, despite their death being heralded every decade – Mitsui is at #9, Itochu at #11, Sumitomo Corp at #14 and Marubeni at #21.

Unsurprisingly, almost none of the Japanese electronics companies feature in the top 30, apart from Canon at #10 and Mitsubishi Electric at #25. Other industries in the top 50 most profitable are automotive (Denso, Bridgestone) and pharmaceutical (Takeda, Astellas) related, and also heavily domestic businesses such as telecommunications (KDDI, SoftBank as well as NTT mentioned above), rail and retail (7&I, Fast Retailing).

Two of the largest Japanese companies in Europe – Fujitsu and Hitachi – are at #69 and #70 – Hitachi’s cumulative profit was heavily dented by the historic loss of $8bn in 2008/9. The largest company in the Europe and Africa region – Sumitomo Electric Industries (due to its labour intensive automotive manufacturing operations) is at #38, with a $6bn cumulative profit.

*Excludes banks, insurance and other financial services companies

“Everyone has responsibility, but nobody can take responsibility” – the roots of nemawashi

One of the most practised concepts in Japanese business is nemawashi, often described as “Japanese style consensus building”. Sometimes explanations go further, getting into the word’s literal meaning- to dig around the roots of a tree in preparation for transplantation. When I talk about nemawashi in my training sessions, I try to create a more vivid image by pointing out that if you want to transplant a mature tree, just yanking the tree out of the ground by the trunk will kill it. The metaphor holds if the goal is to transplant a new idea in a Japanese company. If you were approach whoever you think has the decision making authority (‘the trunk’) and obtain only their approval, it is likely the decision would die in implementation, because you did not get the understanding or agreement of all the other people likely to be affected or interested (the roots).

Europeans do consensus too…

Europeans from consensus oriented national cultures like those of the Netherlands and Sweden, respond to this lesson by saying “well of course, we would always do this kind of consensus building anyway, it’s common sense.” In the Netherlands, consensus-based decision making is known as the polder model. Polders are low lying tracts of reclaimed land protected from the sea by dykes. In the past, all Dutch, regardless of whether they were peasants or noblemen, whether they lived on or near the polders, had to reach a consensus on how to protect them, and everyone had to be involved in carrying out the plan, otherwise all would suffer. Nowadays the word describes the kind of political consensus reached between government, the unions and business to adjust wages or social benefits or environmental protection.

…but it’s differently interpreted

Both Dutch and Japanese would therefore say they have a long history of consensus based decision making, but a study published in the Journal of Management Studies* concludes that “the concept of consensus is interpreted quite differently by Japanese and Dutch managers.” In Japanese companies, nemawashi is carried out through a series of informal, often one-on-one discussions, so that there is already a consensus when the meeting to discuss the “transplantation” is held. The meeting, then, is more about formally recognising the decision. In Dutch companies, the consensus is reached during a meeting, often through quite heated debate. Also, the Japanese managers demand a more complete consensus, whereby all agree, including other departments, whereas Dutch “appreciate the process of trying to reach consensus, but when a difference of opinion persists, the decision is taken by someone”.

This someone would therefore be expected to take responsibility for the decision, if things were to go wrong. In Japan, the view is that a comprehensive consensus is necessary to avoid putting the decision maker and the company at risk, and to preserve harmony and the employee loyalty. Given the time and care taken to get such a comprehensive consensus in Japan, once a decision is made, there is no turning back. To the Dutch, this is symptomatic of Japanese companies, where “everyone has responsibility, but nobody can take responsibility”.

*Comprehensiveness versus Pragmatism: Consensus at the Japanese-Dutch Interface, Niels G. Noorderhaven, Jos Benders and Arjan B. Keizer, Journal of Management Studies, 2007

This article by Pernille Rudlin originally appeared in the Nikkei Weekly. This and other articles are available as an e-book “Omoiyari: 6 Steps to Getting it Right with Japanese Customers”

Amsterdam is first choice for Japanese companies’ regional HQ in Europe post Brexit

“When the UK leaves the EU, it is the strongest candidate for regional headquarters” says one Japanese manufacturer about Amsterdam, in the Nikkei Business magazine. Since the UK said it would leave the Single Market, Japanese companies have started their search for new regional HQ locations. Although Frankfurt and Zurich are also in the game, Amsterdam is seen as particularly strong.

There are many pluses: low taxes, and various regimes to suit different businesses. The logistics infrastructure is robust and it is easy to access the other main economies in Europe from there. Additionally, the lifestyle is congenial for Japanese people.

A priority for Japanese companies is the financial infrastructure. “If we are physically close to our financial services suppliers, then we can easily exchange information and opinions” says the manufacturer. Of Japan’s megabanks, Bank of Tokyo-Mitsubishi UFJ and Mizuho have regional coordinating operations in Amsterdam. There is a possibility that Sumitomo Mitsui Banking Corporation will also move its European coordination activities to Amsterdam.

However, Japanese companies who are looking at moving their base to Amsterdam have one increasing headache, which is the uncertainty of the Dutch political situation. In a survey from 2016 (ie before the election where Wilders’ Party for Freedom did not do as well as feared) of the members of the Japanese Chamber of Commerce in the Netherlands, political, economic and social environment came second as an increasing area of concern, after worries about employment (being able to hire or bring in Japanese employees, tax, pensions and ability to lay off workers). The third biggest area of concern was for expatriate visas and the process of obtaining ID cards. 4th was the legal and regulatory framework – obtaining permits, approvals, meeting standards and whether those standards are appropriate.

There is a concern that if the Netherlands cracks down on immigration, it will be difficult to hire a diverse labour force – one of the UK’s traditional strengths and attractions for Japanese companies.

Top 30 Japanese companies in Europe 2021

FREE DOWNLOAD

Send download link to:

Japanese investors in UK considering shifting operations to Asia, the Americas post Brexit

Although over half of the of the 10,508 Japanese companies surveyed by the Teikoku Databank thought Brexit would have a negative impact on the Japanese economy, it is a salutary reminder that not only the UK but also the EU are just a small corner of the Japanese corporate environment that only 9.2% had business in the UK or other EU countries. A tiny 1.9% had actually set up sales arms or local subsidiaries, with 7.5% having collaborative agreements or importing/exporting from the EU or some other indirect business. Unsurprisingly, the larger the company, the more likely they were to be active in Europe. Manufacturers and wholesalers were dominant, but financial services companies represented the top direct investors.

Of the companies surveyed,

35.9% had business with Germany
31.5% with the UK
23.3% with France
21.4% with Italy
11.9% with Spain, 11.9% with the Netherlands

Of those who were in Europe and considering moving operations, the top choices for destination were:

2.9%　to Asia
EU (undecided/unspecified) 1.6%
Italy 1.5%
UK 1.3% (despite Brexit)
Germany 1.2%

Of those who had directly invested in the UK, 12.8% of those who were looking to move operations were considering elsewhere in the EU (Unspecified EU, Germany, France being the most cited) but Asia and the Americas were also mentioned as frequently as Germany or France.

51.3% of the companies who responded felt that Brexit would have a negative impact on the Japanese economy, although over 60% felt that it would have not much impact on their own company, with only 9.4% saying it would have a negative effect. However 46.2% of those who had direct investments in the UK said there would be a negative impact.

Hardly any respondents (less than 1%) said Brexit would have a positive impact on the Japanese economy or their industry and only 2.6% of those companies with direct investments in the UK said it would have a positive effect on their own company.

In other words, large numbers chose “don’t know” or “no effect” as their response.

The Teikoku Databank concludes that the EU is likely to be dominated by Germany and France in the future and the non-Eurozone EU countries are going to find it hard without the UK as a member. There are counterwinds to free trade and a concern that Brexit will lead to other countries leaving the EU. “The EU is nice as an ideal, but there are too many contradictions in terms of the varying levels of political and economic development” says one canned goods wholesaler.

Brexit rebalancing for Japan’s automotive companies

Record UK car production for 2016 was reflected in the 2% increase in employment by the largest Japanese automotive companies in the UK on the previous year. The fall investment in the UK automotive sector from £2.5bn to £1.66bn tells the other side of the story, which is that employment growth for Europe and Africa overall for those companies was greater than in the UK – at 7% – the main contributor being Yazaki opening plants in Morocco and Bulgaria.

As Mike Hawes of the Society of Motor Manufacturers and Traders puts it “Any imposition of tariffs is “an absolute red line for the industry” that would throw the future of some plants into doubt. “It would be very hard to overcome that level of additional cost, given plants operate on pretty wafer-thin margins.” Factories would not close overnight, he added, “but the potential is for death by a thousand cuts” as the manufacture of new models was moved abroad. “If you produce three or four models and you lose one, then inherently your competitiveness is affected.”

The Japanese automotive sector account for 7 of our Top 30 Japanese employers in the UK (if you count Pilkington, which manufactures a mix of automotive and construction glass). Globally these seven companies (Honda, Toyota, Nissan, Calsonic Kansei, NSG Pilkington, Denso, Yazaki) employ over a million people, around 10% of which are in the Europe and Africa region and around 2% (23,000) in the UK.

According to our analysis of last year, a rebalancing may well already be under way. It looks like Nissan and its suppliers (Calsonic Kansei and Yazaki) had a good year in 2016 in terms of employment and production levels – but Calsonic Kansei has made investments in plants in Spain and Russia over the past couple of years, where Nissan has other factories. Toyota and its supplier Denso reduced their employment levels in the UK in 2016 – in line with the decrease in production at Toyota. The big growth story in Europe & Africa in terms of employment and investment was Yazaki, who added 150 employees to its design and sales operations in the UK, but this was dwarfed by the additional 10,000 employees in the region generated by opening plants in Morocco and Bulgaria.

Honda, Calsonic Kansei and NSG have their regional headquarters in the UK. Honda‘s UK employment and production levels grew (whereas employment shrank in the region overall) and they have publicly declared that their UK factory will be a global supply hub (80% of its production is exported to the EU). However, relative to the to the other 6 companies they have a smaller presence in the Europe & Africa region – the only other production facility being a factory in Turkey – which at least has the advantage of being in a customs union with the EU.

Japanese companies in the UK

FREE DOWNLOAD

Send download link to:

I confirm that I have read and agree to the Privacy Policy.

I would like to subscribe to the free monthly Rudlin Consulting newsletter on Japanese companies in Europe. Rudlin Consultingの在欧日系企業についての最新リサーチとレポートを掲載した無料月間ニュースレターに登録したい。

“Innovative jam” or Singapore? Foreign Direct Investment post Brexit

A Brexit supporter recently told me that he wanted Brexit to mean the removal of as many tariff and non-tariff barriers as possible, so we would have cheap imports and the UK would become once again “the most prosperous nation on earth, as it had been in the 19th century”. Free trade in the 19th century prodded the British economy of the industrial revolution to the services based economy we are now. But it has taken a century to work through, and we still worry about the impact of globalization on an industrial and agricultural workforce who cannot easily or willingly switch to service sector jobs.

In the 19th century, the flood of cheap imports was paid for by the profits from the UK’s investment in foreign railways and other industries overseas and our management of trade routes – particularly in relation to the British Empire. Up until 2011 the UK continued to pay for its trade deficit by making more money from its overseas investments than foreign investors were making from investments in the UK. Since 2011 the UK is no longer making enough money from its overseas investments to make up the deficit. The current account deficit is financed by the continued growth of foreign investment into the UK on the capital account.

So Brexit supporters have proposed three non-mutually exclusive ways to reinvent 19th century free trade prosperity for the UK, absent an Empire we can exploit. One is to compensate for any loss from no longer being members of the Single Market by making the UK as low cost and deregulated a place to do business as possible to attract more foreign investment (the Singapore option). Another option is for British businesses to expand into further flung overseas territories that they have for some reason been neglecting up until now. Or there is the “innovative jam” option, where we identify manufacturing or services that the UK has comparative advantage in and can export more of.

Japanese investment has been a key component of foreign investment into the UK, with greenfield manufacturing investments in the 1970s and 1980s like Nissan, Toyota and Honda but in the past 20 years has been more to do with acquisition or building up service sector presence such as banking and insurance. Some of the acquisitions built up a supply chain within the Single Market (particularly the automotive parts suppliers such as Denso/Marston/Excelsior, Calsonic Kansei/Llanelli Radiators) and others have been pure service sector market share acquisitions (such as Itochu buying KwikFit) or to buy up creative and technological expertise (Dentsu/Aegis, Softbank/ARM). So apart from the automotive sector, lack of access to the Single Market might not be such a blow to these acquisitions. Nonetheless, I know from my own experience that is not low cost or lack of regulations that are the most attractive for Japanese companies who invested in the UK – they were looking for stability and a skilled workforce, for long term sustainability, not short term profit. Brexit and the loss of regulatory predictability makes the UK less stable, and it also seems we might cut off access to the non-UK EU wide skilled workforce, who make up around 30-40% of the employees of some of my clients.

Alex Brummer, City Editor of the Daily Mail and author of “Britain For Sale – British Companies in Foreign Hands – The Hidden Threat to Our Economy” wrote in the Daily Mail regarding the multibillion dollar writedown arising from the Toshiba profit inflation scandal that “Toshiba shows the foolishness of relying on foreign owners, who put their domestic agenda first, ploughing money into Britain” and “corporate Japan operates to very different accounting and governance standards to Britain” (citing Olympus) and that this should worry the UK because Toshiba has investments in the UK nuclear power industry.

He then goes on to point at Dentsu‘s overtime related suicide scandal (although he doesn’t mention Dentsu’s earlier overcharging scandal) and how Dentsu has bought up Aegis, a UK advertising agency. He asserts that the CEO, who has now resigned, may have taken his eye off the ball due to his global expansion ambitions. He also laments the acquisition by Softbank of Cambridge based chip designer ARM.

“When command and control of our infrastructure, technology and creative industries is passed to decision makers far away, we all suffer.” he concludes. No evidence of this suffering is given. Presumably the worry is that Toshiba will have to pull out of the 50 per cent stake in NuGen it acquired from Spain’s Iberdrola, which is looking at building a 3.6 gigawatt nuclear power plant near Sellafield in Cumbria. No mention is made of Hitachi, who acquired the stakes in Horizon Nuclear Power after German utilities E.ON and RWE pulled out a few years’ ago – and have transferred their global rail HQ to the UK. I’m also not clear how Dentsu’s domestic woes are supposed to impact Dentsu Aegis Network. Nor what the issue might be with Softbank acquiring ARM, as Softbank’s CEO Masayoshi Son has promised to dramatically increase employment in the UK rather than asset strip. The trend I have seen with these acquisitions over the past decade or so is that Japanese companies have given up trying to manage everything from Japan and as with Dentsu Aegis Network, or Hitachi Rail, or Japan Tobacco, the international headquarters has moved to Europe.

I would argue that it is globalization and foreign acquisitions which have forced Japanese companies to become more transparent in many cases (Olympus acquiring Keymed, and thereby whistleblowing CEO Michael Woodford coming on board, or Toshiba making a mess of acquiring Westinghouse and CB&I Stone & Webster), and as a result, Japanese corporate governance is improving, albeit slowly. The majority of corporate governance scandals both in Japan and the UK are in the domestic services sector – certain British retailers for example, or banks – indeed Alex Brummer’s other book is “Bad Banks – Greed, Incompetence and the Next Global Crisis”. It was RBS’s acquisition of ABN Amro, and HSBC’s compliance issues in the USA, Switzerland and Mexico that exposed their lack of proper governance and management capability, and Rolls Royce had to pay fines to US and Brazilian regulators for their corrupt activities there.

Given that the Daily Mail and Alex Brummer are pro Brexit, is the implication that Brexit should not lead as other Brexiteers suggest to the UK becoming the new Singapore, but an opportunity to put an end to any further foreign direct investment in key industries, and maybe even try to kick out the current foreign investors in our infrastructure, technology and creative industries? At least that way our corruption and incompetence will be purely domestic and less prone to being exposed globally, because I would imagine other investor countries will retaliate by blocking British investment and erecting non-tariff barriers too, which might make doing any deals with China or Japan tricky. And if we don’t concede on immigration, a trade partnership seems unlikely with India, so that leaves other former colonies in the Commonwealth and the Anglosphere, for whom I doubt 19th century relationships with the UK feature much in their visions for the 21st century, with the possible exception of Trump.

Or there’s the “innovative” jam option. We will have to find alternative export sectors to build up, because the export sector we really had an advantage in after decades of free trade and EU membership – providing the professional services to support multinational industries (law, design, IT, engineering, research & development, finance, insurance, consulting, advertising, accounting, education) will fade away. If this kind of Brexit nativism really takes hold, multinationals will take their business elsewhere, swiftly followed by most of the EU professionals themselves. Still, at least we get back control.

Category: Japanese business in Europe