Japanese business in Europe

5 reasons Japanese overseas ventures fail

Around 40% of overseas ventures by Japanese companies result in withdrawal, according to Masato Hikita, director of Headwaters IT consulting company, writing for Diamond business magazine. His clients usually suffer from at least one of the following, he reckons:

No one person with decision making authority

Overseas companies are shocked to hear that Japanese executives don’t actually have executive power. When Japanese companies venture abroad, they usually send the kacho (section chief) out on a scouting expedition, and he talks to people on the ground there who agree that they should collaborate on a project. The local company gets moving quickly, but at this point the Japanese company suddenly grinds to a halt. When asked why, the Japanese company responds that now the bucho (head of department) must visit. And then after that, that the director must visit. At which point the local company wonders why on earth they have to answer the same questions so many times, and decides to start negotiations with someone else.

2. Bringing domestic rivalries overseas

Rather than two Japanese companies fighting to monopolise a market and both end up losing, Hikita recommends that smaller Japanese companies collaborate, particularly in the early phases of raising brand awareness in a new market – for example a joint exhibition stand at a trade fair.

3. Being fooled by a local Japanese “pro”

Just because a Japanese person has lived in another country for 10 years, does not make them an expert in setting up business there. Hikita recommends talking to JETRO or going to local gatherings of Japanese businesspeople to get recommendations.

4. No ‘line in the sand’

According to a Japanese government survey, 90% of Japanese SMEs have not set a bottom line for when they will decide to withdraw from an overseas venture. As Hikita rightly says, from my experience, Japanese companies are happy to make plans for growing a business, but don’t do any planning for what should happen if a business fails. Many say because they have never done something like this before, they don’t know how to judge whether something is a failure. Hikita recommends that nonetheless, through talking to partners and other businesses, some attempt should be made at setting limits, and constantly reviewing status.

5. Overconfidence in the brand

Apparently Japanese companies will assert that the local partner should bear all the costs of marketing, because “we are allowing them to use our brand”. As I’ve mentioned before, a common problem for Japanese companies who are used to everyone in Japan knowing who they are and what they do, without having to make the effort to explain themselves. They are so confident in their brand, they believe they will succeed in the “red ocean” of American and European markets, without realising the true investment required to compete.

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Does globalization mean the end of seniority based pay and lifetime employment for Japanese companies?

An HR director at a British multinational recently acquired by a Japanese company told me she was baffled by the response from Japan to her department’s enquiry regarding the company car grade allocation for a group of Japanese expatriate managers being transferred to work in the UK. All they sent back was a list of the managers’ names and their ages, she said.

Of course this is perfectly understandable once you know about the seniority based pay and benefits system in Japanese companies. In European companies, salaries and benefits are based on the job role – how high up the managerial ladder you are and the content of the job – with very little attention paid to age or length of service.

Most of the Japanese subsidiaries I work with in Europe have salary and welfare schemes that are locally appropriate. However there are several aspects of the Japanese HR system which impact employees in Europe, beyond company car grades for expat managers

One aspect is the culture of lifetime employment and the sense of a duty of care for employees. Many Europeans have noticed that Japanese companies are very reluctant to fire even the most poorly performing employee, whether they are European or Japanese. While Europeans are sympathetic to this compassionate stance, they point out it does make performance management for the rest of the team difficult. If poor performers are still on the team, it is demotivating for the other team members.

The other aspect, which is said to be behind Hitachi’s recent announcement that it will end seniority based pay for managers, is that the uniqueness of the Japanese HR system hinders job mobility across borders. Most non-Japanese multinationals try to have an internal vacancy system, where employees in all countries are able to apply for job openings across the world. This necessitates detailed job descriptions, and a certain level of unified grading, so employees can assess which jobs are likely to be open to them.

Europeans find it very confusing that Japanese expatriates are assigned to their offices without any seeming regard for whether they have the right qualifications, skills or experience for the role.

My hope for Japanese companies is that they will send more of their overseas employees to Japan HQ. I suspect the Hitachi announcement, coming as it does after two years of having built up an international database of their employees, is that they too are hoping a more unified system will allow employees to transfer all around the world and not just from Japan, and that this will be based on competency rather than just personal development needs and whose turn it is.

But I have to say I also hope that Japanese companies, if they follow Hitachi’s suit, do not lose their compassion and loyalty towards their employees as they globalize. Despite all the frustrations it brings, Europeans still prefer the long term security of working for a Japanese company.

(This article was originally written in Japanese for Teikoku Databank News and appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.)

Who takes the most paid holidays – Europe and Japan

The announcement in 2015 by the Japanese government that they want to revise the Labour Standards Law to require companies to ensure that workers take their paid leave allowance has attracted a fair amount of attention in European media. Japanese employees are entitled to an average of around 18.5 days a year but typically only take around 9 days.

Japanese employees are admired for the dedication to work shown by the long hours they put in, but many European managers, particularly Germans, worry that overtime is also a sign of poor management, or could lead to health and safety problems if workers do not take time off to “refresh” themselves.

Europeans are much keener than Japanese or Americans to take their full allocation of vacation days. EU legislation mandates that all 28 member countries must by law grant all employees least 4 weeks’ holiday. The implementation of this legislation varies greatly from country to country however.

The French and the Nordic countries are famous in Europe for taking the most holidays. One survey showed that the French take all 30 of the days they are statutorily entitled to (this includes Saturdays). They can add up to a further 22 days of holiday as compensation if they work more than 35 hours a week.

Nordic countries have 25-30 days entitlement, and there is an almost universal summer holiday from early June through to the middle of August when most families disappear to the coast or to an island for the whole of the summer.

In Germany, there is a variation from state to state beyond the statutory minimum of 24 days for workers, because each federal state sets additional public holidays and determines the school vacation periods.

We British like to think of ourselves as the most hardworking of the European nations. Although 28 calendar days are statutorily guaranteed, this can include public holidays. The norm for most companies is to offer 25 days, in addition to the 8 or 9 public holidays. There is a trend now for British companies to offer a menu of employee benefits, which includes the ability to buy and sell days of holiday allowances. Unused holidays can also be carried over to the next year, but there is usually a cap on the number of days.

British school summer holidays are much shorter than in Nordic countries and residential children’s camps are not as commonly used in Europe as in the US, so parents do expect to be able to take at least two weeks’ break in the summer time to holiday with their children.

Consequently, if you are running a pan-European company or team, you have to put mechanisms in place for employees in many different countries to book their holidays well in advance, so that there is sufficient staff cover even during peak holiday times. Furthermore, there are concerns now that even when on holiday, conscientious employees are checking their smartphones for work email. Daimler hit the news headlines recently for implementing a system which auto deletes emails during vacation times, to make sure employees relax properly.

(This article was originally written in Japanese for Teikoku Databank News and 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.)

Hitachi – we’re not heavy, dull or ugly outside Japan

Hitachi is seen as inward looking, conservative and lacking in commercial sense by business people in Japan, but outside Japan it is seen as a motivating place to work, exciting and cool by employees of Hitachi’s overseas subsidiaries such as Hitachi Rail Europe and Hitachi Data Systems, according to Nikkei Business magazine.

Could this help change Hitachi domestically? Currently Hitachi has over 1000 employees with PhDs working for them in Japan, generating many patents, but this technical strength does not seem to be translating into sales. The improvement in profits is largely due to withdrawing from unprofitable businesses such as mobile phones and LCD screens and also the contributions from social innovation business overseas. It is not due to any ground breaking innovation in products or services. It is also seen as being self centred, and not often forming alliances with other companies.

In the rail business however, Hitachi has taken the biggest share of rolling stock orders through to 2019 in the UK. Hitachi first opened an office in the UK for its rail business in 1999, with just one expatriate staffing it. It is now seen as the most powerful train supplier in Europe, according to an executive from Virgin Trains. It has had to completely overhaul its designs however, to cope with the UK’s old fragile railway bridges. Procurement specs for everything from engines, radiators and pumps were reviewed and the body used as much aluminium as possible to lighten the weight. “We were able to use all the expertise we had developed in Japan” says Koji Wagatsuma of Hitachi Rail Europe. “Hitachi’s strength is not just IT, but that we know the operational side of various industries really well”, says Shinya Mitsudomi, CSO of Hitachi Rail Europe.

The other secret of Hitachi Rail’s success is “true delegation”, says the Nikkei. Instead of relying on history and performance within the company, Hitachi has given responsibility to those who know the market best. There is a big difference between the UK and Japanese rail markets, in that the risks taken by the supplier in bids are much greater. It is necessary to guarantee how many people would be needed to run the system per year, and what the lifecycle cost will be.

Alistair Dormer, the CEO, has clearly been a driving force in Hitachi Rail’s success. He likes to hold regular town hall meetings, where he consistently promotes the company’s mission and vision. Ted Yamada, head of HR at Hitachi Rail Europe says “to hire the best people, it’s not just about the remuneration, but to make sure they can get a feel of the kind of company they are working for.” Not only the CEO but also the chairman of Hitachi in Japan, Hiroaki Nakanishi, is a good story teller. As I repeatedly point out in my training sessions, because most Japanese companies are the “family” type, storytelling and parent figures are far more important in giving direction than targets or strategies or policies or structures.

A further feature that Nikkei Business picks up on, is that Hitachi is beginning to pull together virtual company structures, most notably for Hitachi Data Systems. We were moving towards that when I was at Fujitsu – I think IT companies are probably best suited to this kind of organisation – where services have to be provided globally so it makes sense to have teams and hierarchies which span several regions. It does mean a lot of travel to work well – one Hitachi Data Systems director says he has 56 Japan entry stamps on his American passport. Conversely, Japanese engineers travel regularly to the UK and the US.

The feature finishes with an interview with Hiroaki Nakanishi, who comes up with a few punchy quotes. Asked about the impact of Hitachi putting non-Japanese at the top of various regions, he says it has an instant effect on the mindset of the Japanese employees, who now realise that they have to persuade a foreigner of their ideas, so all the “Japanese only” methods they have used in the past will not work. Consequently, decision making and execution have speeded up. Everything in the value chain from marketing to sales, development to production and after sales service have to be overseas. So it’s not possible for Japanese to be seconded abroad and manage everything. Most of the executives are local, non-Japanese. “Before now, Japanese companies would build a factory overseas, but just transfer manufacturing knowhow, and then when it was completed, the head of manufacturing in Japan would fly over and play lots of golf. That’s just no longer feasible.” Since Jack Domme took over at HDS, objectives have been set for individual employees and decision making has become more transparent. HDS is now well regarded by others as a company which would be an enjoyable challenge to work for. “Starting small and growing big is just fooling yourself – there are no dreams or hope in that. People with ambitions will not join such a company” says Nakanishi. “We are still a Japanese company, and so there will be some parts which are difficult for non-Japanese to understand, so not being Japanese might be a bit of a handicap” but maybe no more than Siemens is a German company, or GE is American, Nakanishi adds.

Do companies have a social obligation to train employees?

I was surprised when the Japanese expatriate manager at a Japanese logistics firm told me recently that he thought British logistics was more advanced than logistics in Japan. When I returned to the UK after working in Japan for four years at the end of the 1990s, I remember thinking that there was a real business opportunity for a delivery service in the UK similar to Japan’s takkyubin. This thought came to me as I watched an enormous container lorry reverse very cautiously up the 19^th century narrow alleyway to my London apartment, when all they were delivering was a small armchair. Surely in Japan this would have been delivered in a much smaller van, and within a much shorter time frame, so I would not have had to wait in all day for delivery.

Thanks to the rise of internet shopping (the British are the biggest web shoppers in Europe, apparently) and also the liberalisation of postal services, takkyubin type services like MyHermes have now appeared in the UK. You can book a time slot for next day pick up from your house, online, and the prices are cheaper than taking it to the post office, for heavier items.

I assume that similar services are available from takkyubin companies in Japan, so I suppose what the Japanese logistics manager was referring to was the higher volume end of logistics in the UK – transporting large quantities of car parts across Europe, for example.

Although it is possible to get qualifications and even university degrees in logistics in the UK, all the British employees of the Japanese firm at which the Japanese manager worked were in agreement that expertise in logistics was only really developed through practical experience, over time, rather than learning the latest theories in the classroom. In that sense, they were much more in alignment with Japanese apprenticeship style “on the job” training approaches.

As the Japanese manager himself pointed out, the firm’s employees were very indigenous British. Normally when I do training sessions for Japanese companies in the UK who are in the financial or commercial sectors, more than half the employees are not British.

Maybe for those types of companies, attitude and ability to learn are more important than local market expertise, skills and experience. But for logistics and other traditional, highly skilled industries such as engineering, it is tempting to choose someone who already has the local understanding and the expertise and skills born of experience, rather than train someone up.

Such people are scarce in the UK and the rest of Europe however, and instead we have a stubborn youth unemployment problem, of young people who would rather do physical work, or work outside an office, but have not had the training or experience and cannot find stable jobs.

No wonder then that Hitachi Rail has teamed up with other companies to set up a new University Technical College in the north of England. Apparently they were worried they might have to poach employees from nearby Nissan, otherwise.

This article was originally written in Japanese for Teikoku News and 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.

The most popular location for a European HQ

I’ve just been updating our Customer Relationship Management (CRM) database of Japanese companies and their suppliers in Europe. I recently shifted the database to a new cloud-based provider, which enables me to cross reference our customer data with social networking sites such as LinkedIn – a very popular business networking site across Europe and the USA. The way our new CRM interface works has also forced me to focus much more on how our Japanese corporate clients are organising their operations across Europe, including where they have placed their headquarters.

My conclusions are not entirely scientific, as my own business is based in the UK and therefore biased towards UK based Japanese companies, but it does seem that the UK is the most popular base for European headquarters of Japanese companies. Of the 96 European headquarter companies I have identified in my database, 53 are in the UK, 24 in Germany, 10 in the Netherlands, 5 in Belgium, 2 in France, 1 in Switzerland and 1 in Poland.

Of course there are many Japanese companies who do not have a European headquarters, but the trend among those who have been in Europe for a longer period is unmistakably towards consolidating across Europe in terms of functional areas such as purchasing or HR or finance. This seems to be to the benefit of the UK, which is the undoubted European if not world capital of professional services – with many globally capable financial, marketing, legal, consulting and HR firms in London.

The UK has long been a favourite destination for Japanese foreign direct investment, for various reasons ranging from the English language, to golf to the UK’s open economy. Germany has also been very popular, particularly with Japanese engineering companies who feel an affinity with German process orientation and risk aversion, as well as having historical ties such as Fujitsu with Siemens or Denso with Bosch. The North Rhine Westphalia region was particularly active since the 1960s in encouraging Japanese companies to set up there, although Sony decided initially to set up in Berlin, largely, it was rumoured, because of Norio Ohga’s love of the Berlin Philharmonic.

More recently, the Netherlands became popular because of the tax advantages offered, and also, along with Belgium, was an obvious logistical centre for Europe. Lately, however, there seems to be a shift of these headquarters to the UK. Canon has moved from the Netherlands to Uxbridge, near London. Denso and Bosch recently announced their break up, and although Denso continues to be headquartered in the Netherlands, there seem to be several senior managers with European roles based in the UK. Fujitsu and Siemens parted ways in 2009, with the Fujitsu European operations being split between Continental Europe, the Nordics, and UK and Ireland.

Sony sold its Berlin headquarter building in 2008 and is currently in the process of consolidating its sales and marketing across Europe, to be based in Weybridge, a few kilometres south west of London. However, it seems to be shifting towards a “virtual” European structure, with shared HR services now set up in Turkey, and individual senior executives with European remits being based in whatever location they prefer. This pattern has also become evident in other IT and telecoms companies such as NTT Data.

Even this virtual European company structure seems to benefit the UK the most, as senior executives of all nationalities are can be found in, or seem relatively happy to relocate to, London and its suburbs. With more than 40% of London’s population were born outside the UK, London has truly become a global capital and a place to develop global careers.

This article by Pernille Rudlin originally appeared in Japanese in the 10th April 2013 edition of Teikoku Databank News and 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.

Famous in Japan, utterly unknown in Europe

25 years ago I became one of the first ever graduate trainees at the London office of the US public relations consultancy Burson Marsteller. Burson Marsteller told me they were starting various joint ventures with Dentsu in Europe, so it seemed like a great opportunity to use my interest in Japan and my communication skills to support Japanese companies who had been arriving in Europe in increasing numbers in the past decade.

PR in Europe at the time was mostly staffed by ex journalists, focused on producing press releases, and wining and dining journalist contacts so they would write favourably about clients. Changes were in the air, however, which is why major PR consultancies like Burson Marsteller were starting to hire and train new graduates to be “communications professionals”.

In the late Eighties, the Big Bang revolutionised the City of London’s investment banks and stock market, and nationalised industries were being privatised. I was assigned to a corporate PR team, looking after British Gas (which later became Centrica) and a building society, which was thinking of floating on the stock exchange.

They were both facing the new pressures on companies to communicate to stakeholders. Not just to their new shareholders, but also to the communities in which they operated. They needed to show they could still be trusted, even if they weren’t owned by the state, or by account holders. There was also a need to polish their reputation so they could attract high potential graduates.

Japanese companies in Europe have the same needs – now as they did then – but unfortunately I do not think much progress has been made these past 25 years. There are so many companies which are famous in Japan but are either utterly unknown in Europe, or the name is familiar, but there is no notion of what they do, or whether they are good corporate citizens.

Nothing came of the Dentsu joint venture twenty five years ago, but I see now that Dentsu itself has started acquiring companies in Europe and other Japanese PR and advertising companies are strengthening their presence here.

Not only do Japanese companies have foreign shareholders to keep happy, but if they are to succeed in overseas social infrastructure projects, they must ensure that the communities affected are informed and welcoming, and that the best overseas graduates view them as a prestigious place to work.

This is not just a Japanese problem – I recently participated in a survey which I assume was commissioned by Siemens. The survey asked whether I knew that Siemens had been in the UK since 1843, was one of the largest graduate employers in the UK, with 12 factories, and involved with all kinds of sustainable energy and infrastructure projects. I was ashamed of my own ignorance of this, but amused to see that one of the competitors they were benchmarking themselves against was my old client, Centrica.

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

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.

Overseas experience and Japan’s elite, past and present

When I started working at Mitsubishi Corporation in London, I was intrigued by the fact that Mitsubishi had first opened the office there as early as 1915. Most British people, if they have thought about it at all, would assume Japanese companies did not establish themselves in the UK until well after World War Two. In fact it turned out Mitsubishi Corporation was a relative late comer to London amongst the sogo shosha (Japanese trading companies), although the Iwasaki founding family had links with the UK from long before 1915.

I was reminded of these links thanks to a recent talk by Dr Ohnuma Shinichi, professor of Experimental Ophthalmology at University College London (UCL) to Japanese business people in London, where he showed slide after slide of the names of the Japanese future elite who studied at UCL in the Meiji era, starting with the 14 students from the Satsuma clan in 1865, through to Iwasaki Toshiya, who studied Chemistry at UCL in 1901.

Dr Ohnuma was showing us these slides to remind us of how the founders of the modern Japanese state and business had fearlessly travelled and lived abroad, and there was a keen discussion afterwards as to how this spirit of adventure could be revived amongst young Japanese people now.

One of Dr Ohnuma’s suggestions was that Japanese companies should demonstrate that there is a positive advantage to have worked abroad, and to ensure there are proper roles for their employees with overseas experience to fulfil when they return.

At Mitsubishi Corporation it was an unwritten rule that top executives have overseas experience, and as a consequence, most new graduates join Mitsubishi Corporation and other trading companies in the expectation that they will be posted abroad. I realise however, that for other major Japanese companies, whose origins are more domestically oriented, it would be rather hard to implement this rule straight away, when in most cases hardly any of their current executives have overseas experience.

Smaller companies may have more scope to put such criteria in place however. The leaders of such companies can set the tone themselves, just as Sony’s Morita Akio did in 1963, when he controversially relocated himself and his family to New York, in order to understand the US market better.

It is surely no coincidence that the current President of Sony, Hirai Kazuo, lived abroad as a child and worked for Sony overseas. Despite Naruke Makoto (ex President of Microsoft Japan)’s assertion that nobody has ever succeeded who went to international school, Hirai did indeed go to the American School in Tokyo.

Sony may be having its problems right now, but I truly hope it succeeds in its revival plans, and proves that the spirit of entrepreneurism, openness to the world outside Japan and adaptability to change of its founder can live on, if the founder himself has set the tone correctly by his own actions.

(This article was originally published in Japanese, for the Teikoku Databank News and 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.)

My book on the history of Mitsubishi Corporation in London since 1915 is now available in digital Kindle format (link to amazon.co.uk)

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.

Category: Japanese business in Europe