speaker events

Reflections on the past forty years of Japanese business in the UK – what’s next? – 7

(continued from part 6)

The Japanese consumer electronics companies which were such prominent sponsors of the 1985 Japanese Miracle conference at Oxford University had all set up manufacturing in the UK in the 1970s. Sony was the first, taking over an empty factory in Bridgend, with support from the Welsh development agency. Sony denied that it had been forced to manufacture in the UK because of the upward trend in the yen, or in response protests from British manufacturers at the high level of imports coming from Japan. It pledged to use local components as far as possible, and when asked whether it would introduce Japanese paternalism to UK labour relations, Mr Okochi, the MD, responded “when in Wales do as the Welsh do”.

Panasonic (or Matsushita as it then was) also set up a factory in Wales, near Cardiff and Hitachi adopted an old GEC TV factory in Aberdare. Nissan started manufacturing in Sunderland a year after the conference, the same year Honda opened its plant in Swindon, after having had a partnership with Rover since 1979, and manufacturing under licence.

It is well documented that Honda was extremely shocked by the state of British automotive manufacturing efficiency that it saw at the Rover plant, of tea breaks, working to rule and demarcation disputes. No doubt this was why Nissan and Toyota – who set up in Derbyshire in 1989 – were determined to build an effective, well trained workforce from scratch.

Hitachi and Nissan also brought Japanese style labour relations to the UK, by adopting a one union policy – and as far as I am aware, Nissan has never had a strike in its Sunderland factory since. British workers were in turn favourable towards other Japanese management practices, such as managers eating with workers in the same canteen, and dressing in the same corporate overalls, rather than a jacket and tie.

Sony still has operations in Bridgend to this day, but more focused on B2B rather than consumer electronics, such as broadcast equipment. Panasonic still manufactures home appliances in Wales but Hitachi closed its Aberdare plant in 2001. Hitachi is also now more focused on B2B, particularly energy and rail related businesses, with a rolling stock plant in Newton Aycliffe.

(For more on this period, see our post Hitachi in the UK from TV to Trains)

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Reflections on the past forty years of Japanese business in the UK – what’s next? – 6

(continued from part 5)

The Japanese Miracle was the title of a conference held by AISEC at Oxford University in December 1985. Japan’s economic success was beginning to be noticed, but often as a threat, with books starting to appear such as Japan as Number 1 and American unionists smashing up Toyota cars.

I joined the organizing committee of the conference, but am unnamed in the programme you can see here, as I was only a fresher, so was mainly used like a runner on a film set. The programme is a great snapshot of the influential people in UK-Japan business and political relations who were guest speakers, and features a long list of Japanese and British corporate sponsors.

On the Japanese side, the list is dominated by consumer electronics manufacturers – Hitachi Consumer Products, Casio, Panasonic, Sony and Toshiba Consumer products. My generation had grown up as teenagers with the Sony Walkman, a Panasonic or Sharp double cassette deck, Hitachi TVs and Casio calculators. The Zaikai (Japanese financial community) are represented by trading companies such as C. Itoh (now Itochu) and Mitsubishi Corporation and Nomura and the Industrial Bank of Japan. All of these companies still exist to this day – although the consumer electronics companies have shifted more to B2B.

Financial services companies featured heavily on the UK sponsor list, but very few have the same name or ownership structure as in 1985 apart from Barclays. Price Waterhouse is now PwC, Ernst & Whinney is EY, Touche Rosse is Deloitte. Austin Rover has become part of JLR, owned by an Indian company. British Steel is owned by a Chinese company. ICI was mostly acquired by the Dutch company AkzoNobel. Jaeger went bankrupt and is now just a brand owned by Marks and Spencer. The only company that remains pretty much as it was in 1985 is J Sainsbury. To quote Napoleon again, Britain is indeed a nation of shopkeepers.

Reflections on the past forty years of Japanese business in the UK – what’s next? – 5

(continued from part 4)

In the next part of my speech to Jiji Top Seminar, I took Napoleon Bonaparte’s view that “to understand the man you have to know what was happening in the world when he was twenty” and looked at the state of the UK in the 1980s, to understand the influences this might have on Keir Starmer now.

After a year at Hiroshima University in 1984-5, I began my degree at St Edmund Hall, Oxford University. This photo was taken on our matriculation day – if you look at the orange circles you can see me, aged 19, but also Keir Starmer, who had just turned 23.

I don’t think we ever met properly, as he was doing a postgraduate law degree and I was a first year, studying Modern History and Economics – I do remember one time drinking with some post graduate lawyers at the Middle Common Room bar, but that was a rare event. But, having read Tom Baldwin’s excellent biography of Starmer, I feel we are very much of the same generation and mindset in terms of what influenced us around the age of 20.

The poster on the right was on quite a few student bedroom walls – our generation grew up during the Cold War and was genuinely fearful of a nuclear apocalypse. There had been a real war too, the Falklands war of 1982, which Britain won, and that gained huge popularity for Mrs Thatcher. But for young people on the left, the defining event of that time was the miners’ strike of 1984-5- a gruelling, year long strike where there was bitter conflict and even a couple of deaths. Thatcher was determined to win that too and had stockpiled coal in preparation.

It was all part of the deindustrialization of Britain, perhaps inevitable, but the way the miners were treated, with no thought as to what would happen to them next, seemed unforgivable. In fact the year before the strike had already marked a turning point, when the contribution of the services sector to UK GDP outstripped the contribution of the manufacturing sector.

(to be continued)

Reflections on the past forty years of Japanese business in the UK – what’s next? – 4

(continuing from part 3)

Britain still seemed very inward looking when we returned to it in 1977 after five years in Japan. Friends and family showed very little interest in asking us about our experiences.

At school, I was the outsider, the odd one. Thanks to my funny name I was teased with chants of “PernilleitsDanish”. I was totally ignorant of British popular culture and it was only through pure luck that I passed the leader of the girl’s gang’s test of what football team I supported (thank you Liverpool) and which Bay City Roller I fancied (thank you Les McKeown for being obviously the most handsome). If I talked about my time in Japan people would either ask me to say something in Japanese, or say “yes, you look a bit Japanese.”

Looking back on it, I estimate my school was 99% White British and British born. There were immigrants in Britain, of course, but in particular areas of the UK like Bradford or Brixton. This is confirmed by the chart here showing the census results from 1851 to 2021* – in the 1970s only around 5 or 6% of the population were born overseas, compared to around 17% now. In current day Japan, around 3% of the population have foreign nationality – similar to the UK in the 1950s.

The Wimbledon effect, whereby foreign ownership of businesses and foreign talent were welcomed into the UK, started under Thatcher’s conservative government, with a programme of privatisation and deregulation. With this also came public sector funding cuts, including in higher education. This spurred my parents into moving back to Japan again, just as I was finishing my school.

*The eagle eyed will note this chart is based on research by MigrationWatch, which campaigns to reduce immigration. I have spent many years researching the census returns myself, and suspect there will be problems with the data as often place of birth entries are mangled or illegible or not given – particularly if digitised records that are on Ancestry.com are used. I suspect the mistakes cancel each other out, however, and the general overall trend is correct. Note however that MigrationWatch does not include Ireland born people as “foreign born”. Also that people who are only visiting the UK temporarily are recorded in the census.

Pernille Rudlin speaking on navigating workplace harassment and purpose at 24th September event in London

Pernille Rudlin will be speaking (in Japanese) on “Navigating Workplace Harassment and Purpose” on 24th September 2024 16:00 in London as part of a free HR seminar with Centre People and Lewis Silkin. You can use the QR code or email address as below to register.

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:

Japanese corporate integrity in a disintegrating Europe

I’ve made a screencast (12 minutes with captions – ably edited by my son) of my keynote speech at a Dutch Embassy event for Japanese companies on a clipper ship on the Thames last month. It looks at the challenges facing Japanese companies trying to build their employer brands in a disintegrating Europe. I explain how difficult is is for Japanese companies to build ‘virtual trust’ across Europe when they are used to implicit communication, sticking to Japanese processes and working as homogenous, Japanese speaking teams huddled into one office.

I introduce the five competencies Japanese companies and their employees need to build trust across cultures – ability to communicate, understanding mutual interests, respecting European and Japanese processes and regulations, being reliable and accountable and having a shared vision and values. You can also find them in my book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

I love Japan but I don’t want to work in a Japanese company

I’ve done a screencast (around 11 minutes long) of my talk at the Centre People Appointments HR seminar earlier this year, on why people love Japan, but don’t want to work for a Japanese company, and what Japanese companies can do about it.

If you want to know more about working in a Japanese company, you can find our Japan Intercultural Consulting e-learning modules on Teachable, starting from £39 https://japan-intercultural-emea.teachable.com/

How Japanese risk aversion explains reactions to Brexit and whether UK should join the CPTPP

I was a panellist for the UK Trade Forum on 25th September 2018, on Japanese business and government viewpoints in response to the UK’s request to join the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP, TPP as was, often known in Japan as the TP11)

The Chatham House rule was invoked, but I believe that I am allowed to report what I said, so long as I don’t attribute any comments to the other speakers.

As I only had 10 minutes, I decided to focus on risk aversion to explain Japanese reactions to Brexit and the UK joining the CPTPP. Even so, I had to drop the final part of my speech, so I will add this back in at the end:

“I have spent more than 45 years now living in or visiting Japan and working with or for more than 200 Japanese companies, and one generalisation I feel I can make, even though I am well aware of the dangers of stereotyping, is that Japan as a nation – as well as Japanese companies – are highly risk averse.

The geopolitical angle

I was reminded of this when I attended a lecture by Koji Tsuruoka last week, the current Japanese Ambassador to the UK, who was also the chief negotiator for Japan for the TPP. He gave a very powerful, thought-provoking speech, tackling head-on controversial subjects like Japan’s behaviour in WWII, whaling, defending Big Pharma IP interests in trade negotiations and so on, in a way that didn’t seem strictly necessary given it was an audience of Japanophiles, but I think his message, on reflection, was very clear. Japan feels very vulnerable, with neighbours such as China and North Korea and Russia, and supposed allies and defenders such as the USA now behaving unpredictably, and it needs a rules based international order because it is energy and resource poor and relies on other countries for imports of these things. WIthout a rules based international order being adhered to, countries behave unpredictably, and this can lead to war.

So this is why Tsuruoka and other Japanese government representatives and ministers have been very positive and welcoming of the UK wanting to join the CPTPP or roll over the EU-Japan EPA, even if the practicalities of this are not clear. They worry that the UK leaving the EU means the UK is also leaving that rules based international order, so needs to be roped back in somehow.

Why are Japanese companies so risk averse?

So that’s the geopolitical side to this – for the rest of my ten minutes I want to look at the Japanese business side, and three sectors in particular, what kind of trends we are seeing and how they are reacting to Brexit and what TPP might contribute in terms of mitigation or otherwise.

So why are Japanese companies so risk averse? I think it’s because they operate on a very different model to the Anglo Saxon, short term, shareholder value model. It could be called a stakeholder model, but primarily the motivation is not to make a quick profit, but long term survival. So they don’t want to do anything so risky as to jeopardise that, and they are very hot on ESG – Environmental, Social and Governance – issues. It’s one of the really good things about Japanese companies, why I am still a fan.

So when the Japan bashing started happening in the 1980s, and many Japanese remember Americans taking hammers to Japanese cars, Japanese companies decided that foreign direct investment was the way forward, and started up factories in the USA and of course also in the UK, with Nissan, and then Honda and Toyota.

They chose the UK – and the UK is the recipient of 40% of Japan’s cumulative FDI into the EU, and has the largest Japanese population in the EU, including intra-company transferees – (but both those numbers are declining these past couple of years – I leave that to you to conclude why, but a hostile environment certainly isn’t helping) – because the UK was seen as a stable, rules based system, low risk place to invest, and of course because we were then members of the EU and a gateway into the EU.

So what is happening now with Brexit in terms of Japanese risk aversion, is that it is tipping them into making decisions and directions they were going in anyway. Looking at the three main sectors of Japanese investment in the UK – automotive and supply chains, IT and electronics and “pure” services – these sectors make up the bulk of the around 1000 Japanese companies in the UK, employing around 140,000 people. Actually many of the 1000 don’t really count because they are paper companies, brass plates, or several versions of the same company, but there are 30 or so really big employers who make up more than half of those 140,000 employees.

Automotive supply chains – a pivot to a new chain of right hand driving nations?

So for Japanese companies, trade negotiations aren’t really about trade in products so much any more, more about protecting their foreign investments. Even then, to be realistic, the EU only makes up around 10% of Japanese companies’ turnover. Asia is still the really big market outside of Japan, and within that, China, and then secondly the US. And the UK is probably only around 10% of the EU total. But the UK is also host to a lot of regional HQs and of course the three car plants.

The main trends you see in the automotive supply chains is that they are shifting eastwards in Europe, to the Czech Republic, Slovakia, and Japanese car manufacturers also have factories in Russia and Turkey, and the suppliers – of wire harnesses for example – have factories in Africa. So Brexit is accelerating that shift.

Can the CPTPP help with this? Well I suppose there are a large number of CPTPP members who are right hand driving like the UK, but when you look at what sells in Australasia for Toyota, it’s pick up trucks like the Hilux, whereas Toyota in the UK is manufacturing the Auris/Corolla. I suppose that shift could happen – at least then there is access to a market of over 100 million, which is supposed to be the minimum to sustain an automotive supply chain. Honda is already trying to sell half of its Civic production from Swindon to the US, so it could happen, despite the distance.

Information technology and electronics – integrated disintegration

You’re also seeing a shift in the power balance in those supply chains, towards the components suppliers, and IT, because of Big Data, the Internet of Things and so on. Which brings me to the second major sector – information & communication technology, electronics etc. Here you’re seeing what I call an integrated disintegration. Japanese companies are becoming more B2B, solutions based, and trying to integrate back office functions, but also customer support, technical support into low cost locations with multilingual educated workforces – so in Europe this would be Portugal, or Poland.

But at the same time, the regional management and sales are becoming more dispersed. Anyone who has worked in a multinational as I did working at Fujitsu will know what this means – endless fights about who gets what in terms of money or actually doing the work, and whereas the UK often won those fights, I am beginning to see signs that Japanese companies are reverting back to the country model, are finding the matrix system just too tough. If you’ve ever run a global or regional virtual team, as I did, you can understand why. So there is a drift away from the UK and to Germany or the Netherlands, as we’ve seen with Panasonic, and it would seem also Sony now, accelerated by Brexit. And that’s bad news for UK suppliers of services to those Japanese companies.

Pure services also need a rule based international order

But Panasonic did not just cite Brexit as a reason for moving its headquarters to the Netherlands. It was also to do with the tightening of Japan’s tax haven rules from April of this year. Dividends and other “passive income” in Japan’s overseas subsidiaries will be the subject of attention of Japanese tax authorities, regardless of how much real business activity they are undertaking, if the corporate tax rate is below 20%. And of course the UK’s is 19% and due to decrease further – reiterated by the Chancellor after the referendum to show that the UK is still open for business.

But actually this is not appealing to Japanese companies. Nor is the “chlorinated chicken” approach about deregulating or having looser environmental or other regulations of much interest to Japanese companies. They want to maintain high standards, and like robust, thorough rules – again, because of the risk aversion.

But there are cultural issues beyond the need for a rules based international order

Although Japanese companies really like being in the UK and I think a lot of the commercial and financial sector companies, like Japanese banks, or trading companies like Mitsubishi Corporation that I used to work for, have no intention of entirely shifting their regional headquarters out of the the UK despite Brexit, if they can help it, one thing that keeps me in business is the cultural gap between Japan’s very process and rule oriented way of managing and the more principles based, some might say “winging it” approach of British management.

I believe Japan is still very reluctant to open up its public procurement and professional services sector, even to the UK, and I can see why. There is not really a developed set of professional specialists the way we have in the UK. Most Japanese employees follow a generalist track. So in trade negotiations, such as the CPTTP or the EPA, it must be very difficult to find common terminology in order to agree any rules for recognition of qualifications, or mutual understanding of governance principles for services, much more difficult than defining standards for products. “Risk” in Japanese is the same word that is used for “crisis”. So it has a very negative meaning, and the neutral concept of risk management is not translatable into Japanese as a result.

Last updated by Pernille Rudlin at 2024-12-17.

Category: speaker events