Japanese Business Blog - Rudlin Consulting

Culture and conduct

I was surprised to receive a letter from my bank, NatWest, a couple of months ago, offering me £4,000 to switch my business account to another bank. It turned out that this was not a scam, but a consequence of the bank having been rescued by UK government funds during the Lehman Shock. In return for the £46bn bailout, NatWest has to encourage competition in the UK business banking sector.

Various new internet-only “challenger” banks were offered to me such Starling but in the end I chose the Co-operative Bank, which was established in 1872. This was partly due to my concern that there were likely to be technical issues with transferring to somewhere new and untested with no physical presence. It helped that I was called almost immediately by someone from the local branch, inviting me to come and meet them face to face. But I also liked the Co-operative Bank’s customer-led values and ethics.

This clearly defined corporate culture was the result of the Co-operative Bank’s own past problems. In 2013 it reported losses and a funding gap between how it valued its loan portfolio and the actual value it would realise from it.

An independent review concluded that the root of the problem was in its takeover of the Britannia Building Society in 2009 and poor management controls. The non-executive chairman of the bank resigned and was later banned by the Financial Conduct Authority from working in the financial services industry for taking illegal drugs and using his work email and phone improperly.

In the five years since, the Co-operative Bank has strengthened its management controls and ethos, as well as undergoing restructuring, including reducing the numbers of branches from over 370 to 50.

My old bank NatWest also hit further problems after the Lehman Shock. Its problems in 2008 were a consequence of management arrogance and overreach, but its involvement in the LIBOR (London Interbank trading system) interest rate fixing scandal in 2012 was found to be the result of a corporate culture of greed. The investigation into the LIBOR scandal by the Financial Conduct Authority resulted in a new regime emphasising corporate culture and conduct in financial services.

A Japanese manager who had been in the London branch of his bank in the early 2000s and had recently returned for a second posting remarked to me how much tougher the environment in the City of London is as a result. He and other managers have to undergo training not just on complying with regulations, but also on how to identify and deal with problematic conduct, both their own and their teams.

The Co-operative Bank has just received a takeover approach from a US private equity firm. SMBC and other Japanese financial institutions are investing in London’s fintech and start up banking sector. Any investors in British financial firms will need to ensure that their own corporate culture and values are robust enough to ensure further scandals do not occur.

This article originally appeared in Japanese in the Teikoku Databank News on 13th January 2021

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The advantages of investing in smaller countries

I was asked to speak at a Portugal-Japan Investment event at the end of 2019. Initially I was worried about what I could say as I was not sure there would be much that would interest Japanese companies in Portugal. The population is only around 10 million and multinationals mostly either have a small sales office there, or cover it from Spain.

For British people Portugal is mainly seen as a nice place to go on holiday – for golf or the beaches or to enjoy the rich history, culture and port wine. There are also some similarities in temperament between Portugal, the UK and even Japan – a gentility, understatement and a slight melancholy which contrasts with bigger European nations like Spain or France or Germany.

Portugal is the UK’s longest standing ally – for more than 650 years – and the Portuguese Prime Minister and officials who spoke at the event emphasised that they saw Portugal as an additional base for Japanese companies, rather than an alternative to the UK.

Portugal has strengths in traditional sectors such as food, apparel and automotive manufacturing. For example, Toyota has a joint venture with Caetano, who also have a joint venture with Mitsui, manufacturing electric buses. There are also some emerging strengths, such as energy and IT services, particularly business process outsourcing.

The two Japanese companies that spoke on the panel with me were Fujitsu, who employ nearly 2000 people in Portugal now, providing business process outsourcing and IT services and Marubeni, who have invested in various energy projects.

All the presentations emphasised the obvious advantages of Portugal. Firstly, that the economic and political risks are low. Portugal has recovered well from the Lehman Shock recession, does not have much populism, and the coalition government has been in power for over 5 years.

Secondly, Portugal has a well-educated (particularly in science, technology and maths), multilingual workforce. And thirdly, as well as being in the EU, it also provides a bridge to Portuguese speaking markets, most notably Brazil.

But there was an additional reason, given by the Marubeni representative which caught my interest. He said that starting a new business in a smaller economy meant it was more “manageable”. A foreign direct investment expert at the event confirmed what I had found out through my own researches on Japanese companies in Europe – smaller European countries are becoming popular foreign direct investment destinations.

Japanese companies in Portugal have quadrupled (from a small base) over the past 6 years, but other European countries of 6-11 million population size have also seen an increase in Japanese acquisitions or greenfield manufacturing investment, such as Finland, Sweden, Hungary and Czech Republic.

The number of Japanese expatriates in Portugal has not risen quite so rapidly. Growth in the Japanese communities in the Netherlands, Poland and Ireland has been greater. From a business, as well as a weather, food, golfing and cultural perspective, I wonder whether this might be about to change.

This article by Pernille Rudlin was originally published in Japanese in the Teikoku Databank News on 15 January 2020

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Japanese companies in Ireland

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

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

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

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

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

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

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

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

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

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

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

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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:

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The Brexit Agreement, One Month On, with David Henig and Pernille Rudlin

Pernille Rudlin, managing director of Rudlin Consulting will be speaking at a Japan Society webinar on the Brexit agreement one month on, on Thursday 4th February, 12 noon to 1pm GMT. Further details and free registration here.

As 1 January 2021 saw the end of the withdrawal transition period and the implementation of the post Brexit UK-EU Trade and Cooperation Agreement that had been finalised only on Christmas Eve, Japan Society chairman Bill Emmott will be joined by David Henig, director of the UK Trade Policy Project, EPICE, and Pernille Rudlin, EMEA representative of Japan Intercultural Consulting, to review the first month under the new arrangements.

The UK-EU TCA took four years to agree, following the June 2016 referendum, but this 1,246 page document was settled only one week before it was due to come into force. Not surprisingly, businesses of all kinds have struggled to adjust to the new customs rules and paperwork, despite this being, for goods, a zero-tariff and zero-quota agreement. What lessons have we learned over the past month as businesses got to grips with the detail of the agreements? What has the immediate impact been and what are the key issues still to be resolved? And what is the TCA likely to mean for Japanese companies operating in and investing in the UK?

David Henig is one of the UK’s leading authorities on trade policy. He is Director of the UK Trade Policy Project at the think-tank European Centre for International Political Economy (ECIPE) and has written extensively on the trade implications of Brexit, but also looks more widely at global trade issues such as USA-China tensions, the future of the WTO, and EU trade agreements. David regularly discusses trade issues in the media, and advises global business on the implications. He previously worked for the UK Government on EU-US trade negotiations and China-US issues in particular, in business as a consultant, and graduated from Oxford University.

Pernille Rudlin is the Managing Director of Rudlin Consulting which provides research and consulting on Japanese companies in Europe, as well as EMEA representative of Japan Intercultural Consulting.
She spent nearly a decade at Mitsubishi Corporation working in their London operations and Tokyo headquarters in sales and marketing and corporate planning, and also had a stint in their International Human Resource Development Office. More recently she had a global senior role as Director of External Relations, International Business, at Fujitsu, the leading Japanese information and communication technology company and one of the biggest Japanese employers in the UK, focusing on ensuring the company’s corporate messages in Japan reach the world outside. Pernille is also a member of the Japan Society’s board.

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Are there 10% or 1% fewer Japanese companies in the UK than five years’ ago? And why?

We covered in a previous post how Japan originated companies continued to increase their presence in Europe – apart from in the UK and Switzerland – over the past 5 years. We used the Japanese Ministry of Foreign Affairs annual data, which showed an 11% decline from 1,064 Japan originated companies in the UK to 951 in 2019.

The other source of data on Japanese investment overseas is the Toyo Keizai annual directory. This shows a 1% decline in Japanese companies in the UK from 2018-9, from 972 to 966. It’s the first drop since at least 2015, numbers having risen 11% 2015-2018, according to the Toyo Keizai totals for the UK. We analysed this further in this post, noting that it’s hard to work out where Toyo Keizai derives the net drop of 6 Japanese companies in the UK from. Their list of the 7 companies which have closed down in the UK 2019 shows that this was mainly due to reorganization of holding companies or merging of companies rather than full withdrawal from the UK. Of the 8 new Japanese companies in the UK in 2019, 5 were indirect investments into energy companies by Nippon Koei, a civil engineering company and 2 were indirect investments by WDI, a Hong Kong originated Dim Sum chain which is registered in Japan.

Subsidiaries turning into branches

The Ministry of Foreign Affairs only breaks down its figures by organisational type and sector, but this does provide further clues. The biggest absolute decrease in numbers is amongst those categorized as a subsidiary incorporated in the UK. There were 480 such companies in the UK in 2014 – this fell 16% to 404 in 2019. Conversely branches of local subsidiaries rose 31% from 179 to 226. This seems to indicate that a fair number of UK incorporated subsidiaries unincorporated and became branches over this period, particularly over 2018-9. This tallies with what we have observed empirically – most famously with Sony Europe and Panasonic Europe becoming branches of EU subsidiaries but also a dozen or so others such as Takeda, Shionogi, Sanden, Fujitsu General, Murata and Alps becoming EU branches.

It looks like Brexit also provided an excuse to do a bit of tidying up, – consolidating multiple subsidiaries into one, for example. The Ministry of Foreign Affairs data also include companies established by a Japanese national with over 10% share in equity in its figures. This number has shrunk by 68 since 2014 to 96. We suspect this may be in part to do with those Japanese nationals becoming permanent residents in the UK or British citizens (other MoFA figures show this group has grown considerably) and therefore no longer included.

Manufacturing turning into wholesaling

Breaking the number down by sector also provides some insights. Japanese companies in the UK who are manufacturers are the biggest group, despite the UK’s heavily services oriented economy. Their numbers have dropped 22% from 2014 to 2019, from 417 to 326. Conversely, the number in the wholesale and retail sector has increased 44% from 112 to 161. The changes in the two sectors may be related, as Oki, Sony DADC, Tamura, Keihin, Nicera, Zeon Chemicals and Maruwa stopped production in the UK during this period but remained as wholesalers in the UK. Financial services companies, traditionally a UK strength, fell by a third from from 114 to 75, which is surprising considering they were active pre-Brexit in acquisitions, but perhaps again reflects some Brexit-related consolidation and divestment. Closures we are aware of include MC Asset Management, Speedloan Finance, Okasan Securities, Nomura Alternative Investment Management, Sumitomo Mitsui Asset Management.

The sectors where there have been significant jumps in investors show where Japanese corporate interest in the UK now is. The number of Japanese utilities companies investing in the UK rose 120% from 10 to 22 and in the lifestyle and leisure sector by 289% from 9 to 35 – some new entrants we have been aware of the past couple of years in these two categories have been Hakutsuru Sake, MTG, Asahi Premium Brands, JERA Power, Nippon LP Resources, DTM Renewables and Sojitz Energy. The majority of “new” Japanese companies in the UK over the past five years were the result of acquisitions.

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An end to one size fits all training in Japan

At a meeting I facilitated of Japanese and non-Japanese board directors of a financial services company in London, the Japanese directors had many questions about employee development in the UK. They wanted to know how the highly specialized professionals in the firm gained the management knowledge needed to reach senior management positions. The answer was that in the UK this is largely through attending externally provided courses, in contrast to Japan where this knowledge has traditionally been gained “on the job” through job rotation.

This then led to a further question – what is the incentive for employers to invest in externally provided training if employees just use this as a springboard to go to another company?

The answer to this was that British financial services companies are under increasing pressure from the regulatory authorities for managers to be accountable for not only their own conduct and behaviour but also that of their team. This means that the annual performance appraisal is not just about whether performance targets have been met but also behavioural goals. Any gaps between expectations and achievement in terms of performance and behaviour should then lead to a development conversation about what kind of training and resources the employee needs to do their job better.

With the introduction of “job type” (known as “job kei” in Japanese) HR systems, this kind of approach will be needed in Japan too. It is different from seika shugi (literally “results based system”, introduced in many Japanese companies in the 1990s and 2000s) because seika shugi was more focused on performance targets and the impact on bonuses, whereas job type appraisals are both on performance and behaviours and what this means for the person’s future development.

Managers cannot just leave it up to HR departments to take the “yoko narabi” (one size fits all) approach to training each cohort simultaneously because the training has to fit the job descriptions and personal development plans. Similarly pay and bonuses cannot be set at a “one size fits all” basis across every department either.

It may take a while for a graduate recruit to grow into the job, however, depending on the function or business they are allocated to, so it would be unfair if there was too much disparity in the way the graduate intake was treated, early on.

This is why major employers in Europe such as Unilever have multiple graduate training programmes. Unilever offers 7 different tracks for its Future Leaders Programme for new graduates: marketing, HR, finance, R&D, supply chain and engineering, technology management and customer development (sales).

I nearly joined the Unilever marketing track (more than 30 years’ ago) but rejected the offer because I felt overwhelmed by the huge binder they placed in front of me, mapping out my first three years in minute detail. Instead, I joined a PR company as one of their first graduate recruits. I later came to regret this choice, as the training programme was entirely in-house, poorly executed and graduate trainees were treated inconsistently. Japanese companies need to find a balance between these two extremes and the Japanese yokonarabi model, both overseas and in Japan.

This article by Pernille Rudlin originally appeared in Japanese in the 11th November 2020 edition of Teikoku Databank News

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Hitachi in the UK – from TVs to trains (part 1)

Hitachi’s first foray into manufacturing the UK in the 1970s was extremely fraught. Undeterred, 10 years later, it established its European headquarters in the UK, where it has been located since. It has kept faith with the UK through turbulent times, establishing the global headquarters for its rail business in the UK in 2014.

Hitachi had a sales arm in the UK since 1970, marketing “portable monochrome television receivers, radios and record-players”. This was heralded in The Times as “another challenge on the home market from a Japanese rival” (1) noting that this was the third Japanese group to enter the UK home market in recent months (the other two being Sony and Matsushita).

The enemy within the walls

As with much of Japanese manufacturing investment overseas at the time, setting up production within the European Community (EC) was done to avoid accusations of dumping, and to ensure there was enough local content to satisfy the European Commission. Hitachi initially considered a greenfield site in Washington in the North East of England for manufacturing TVs in 1975, shortly after Sony and Matsushita had established manufacturing in the UK. This attracted such hostility from UK domestic competitors worried about overcapacity that Hitachi shelved the idea.

Hitachi was hoping to source cathode ray tubes from British firm Mullard, the only UK manufacturer of colour TV tubes, who were initially very reluctant. They maintained in 1977 that they were not ready to accept a Hitachi offer to buy 25,000 of its tubes a year from 1980. Jack Akerman, Mullard’s managing director, sounded positively sniffy about Hitachi’s technology. “We must be absolutely satisfied that our merchandise is going to be used in a technical environment where it will perform well and live well. If all the technical points are answered and we are satisfied, then it would be acceptable for Mullard and Hitachi to trade together in the event that Hitachi’s new factory were welcomed to this country by the Government.”(2)

The Times ran an opinion piece by the commercial editor Derek Harris asking if Hitachi was going to become “the enemy within the walls”. (3) It detailed a rumour that Finnish made TV tubes (from a partly Hitachi owned company) might supply Hitachi in the UK instead, in return for British fighter aircraft exports to Finland, in an offset deal between governments. It described how Mullard’s real concern was not technological compatibility so much that the British TV industry had substantial overcapacity, so Mullard supplying Hitachi would simply result in damage to existing UK customers of Mullard such as Rank, Thorn and Mullard’s sister company Pye (both were owned by the Dutch company Philips).

Harris quotes Akerman as saying “those first few years will be as smooth as silk. But then – watch out. In Japan they are planning for the year 2000, They want to dominate the electronic equipment business and, as we have said consistently, we don’t blame them.”

“Critically endangered” by tube imports from Japan

Derek Harris wrote a further piece in The Times in October 1978 (4) noting the warning from the European Electronic Component Manufacturers’ Association that the European electronics industry was being critically endangered by cheap imports from Japanese TV component makers. The tubes represented a third of the value of a TV set, and out of every 100 colour sets sold in the EEC, 33 contained tubes made in Japan. This was to intensify in the early 1980s when licensing agreements expired, opening the EEC to the larger colour TV sets made in Japan. UK TV manufacturers had an informal agreement with the Japanese industry on import restraint, but nonetheless, it was estimated that Britain’s TV and audio industry was operating at only 50% capacity.

The UK government then introduced Hitachi to the General Electric Company (the UK company that eventually became Marconi, not the US company General Electric) and the two companies formed a joint venture, GEC-Hitachi Television Ltd, in December 1978 and adopted an existing GEC television factory in Aberdare, Wales, along with a workforce of over 2,000.

Hitachi takes over GEC factory

The British continued to manage the plant, and Hitachi invested nearly £3m in new plant and equipment, and provided technical support. At first sales were good, building up a 10% UK market share. By the early 1980s, overmanning and industrial strife led to losses. GEC sold its half of the company to Hitachi in March 1984 and it became Hitachi Consumer Products Ltd. Hitachi instituted a one union policy and reduced the workforce to 800. The plant also began to manufacture hi-fi equipment. Mullard was a supplier to Hitachi, along with Tabuchi Electric who had set up production in the UK in 1985. Philips changed the Mullard name to Philips Components in 1988.

Hitachi also started a video cassette recorder plant in Germany and eventually the German plant also manufactured TVs and the Wales plant also manufacturered VCRs, with German made cylinder heads and chassis being shipped to the UK and British made PCBs being exported to Germany. This meant the local content for both TVs and VCRs were around 80-90%.(5)

The bubble bursts

In the 1990s competition from cheaper TVs and VCRs made in developing countries made it difficult for Hitachi and other UK based Japanese manufacturers to compete. The Aberdare plant was closed in 2001, with the loss of 700 jobs. Hitachi said it would focus on higher value added products in Europe such as plasma screens, projectors for home cinema, DVD camcorders and in-car navigation systems. After several years of losses, Hitachi Consumer Products UK Ltd was wound up in 1995-1997 and the business transferred to Hitachi Home Electronics, until it too was liquidated in 2003, with remaining assets and business transferred to Hitachi Europe.

(1) The Times, 21 August 1970, p 20

(2) The Times, 10 November 1977, p 20

(3) The Times, 18 November 1977, p 21

(4) The Times, 4 October 1978, p 22

(5) Much of this post is based on pages 304-9 of Japanese Manufacturing Investment in Europe, Its impact on the UK Economy, Roger Strange, Routledge 1993

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Takiron – first Japanese company in Wales

Takiron was one of the first Japanese manufacturers to set up in the UK, in 1972. It was the first Japanese company to come to Wales and the third to start production in the UK, in 1974, after YKK and Nittan. It manufactured PVC corrugated sheeting after acquiring an existing factory in Bedwas, Gwent, mostly for export to Europe and America.

The Times in 1972 saw this investment as Japanese chemical and trading companies (Itochu and Chugai Boeki were also investors) “launching a big attack” on the European PVC sheet market through a UK subsidiary. (1) Just before it started operations, a spokesman for Takiron said they had been able to hire British workers at 10%-30% lower rates than they would in Japan, thanks to the current exchange rate, so even with the high cost of raw materials in the UK, it would be possible to export to Europe and America at a competitive price. The president of Takiron at the time, Matsui Yanosuke, even thought exports to Japan from the UK would be a possibility. (2)

One of the first employees was also one of the first Japanese people to be “locally hired” in the UK by a Japanese company – Midori Matsui. She had been visiting the UK on a break from teaching English at junior high school in Japan when a childhood friend at Takiron called her to offer her a job at the new company, teaching English to the new expatriates and helping them to set up the business.

She ended up staying at Takiron for 29 years, becoming a director of the company, until retiring in 2000. According to an interview with her in the Japan Times in 2001, she was thinking of returning to Japan, but was expecting to keep visiting Wales, as she said she would miss the warmth of the Welsh people, and the green fields and open skies. Clearly their appeal was too strong, and she continued to live in Wales, until her death in 2016 at the age of 80. She helped to organise the Japan 2001 celebrations and other local Japan related activities, and was awarded an MBE and a Japanese Foreign Minister’s commendation.

Although she says in the interview that the British lack of commitment to deadlines and work was “different now”, it’s a comment still heard regularly from Japanese working in the UK. But so is her point that the British are forgiving of mistakes and differences, unlike in Japan.

Former Wales rugby player Ken Jones was managing director and then chairman in the 1980s and 1990s. When the pound began to strengthen so that by January 1980 it was around Y550 compared to Y350 in 1979, and the UK went into recession, Jones was upbeat in a Daily Mirror interview: “we have invested £120,000 in new machinery” and added that the staff identified themselves closely with the company – “there’s a high degree of participation here. ” (3)

By 1991 Takiron UK employed 68 people (3) but from the mid 1990s it began to lose money and had shrunk to 57 employees by 2001. Takiron blamed the strong pound and continued high price of raw materials for its difficulties and decided to close in 2001.

The plant was supposed to be taken over by a manufacturer of roller doors in 2006 but was still empty in 2007, when it was taken over for the “biggest rave in South Wales.”

Takiron started as Takigawa in 1919, changing its name to Takiron in 1959. It is owned by the Japanese trading house Itochu and in 2017 it merged with C.I. Kasei (itself a merger between Hama Kasei and Kobe Resin) to form C.I. Takiron. C.I. Kasei had invested 32m euros in setting up a factory in Treviso, Italy in 2007, under the name of Bonlex Europe. The local vocational school was one of the key factors for choosing the location, providing courses in woodworking and automotive, relevant to the plastic films to decorate wood panels and car interiors that the factory produces.

Bonlex is the only subsidiary C.I. Takiron now has in Europe.

(1) The Times, October 4 1972 p 20

(2) The Times, June 7 1973 p 25

(3) The Daily Mirror, 27 November 1980 p 6

(3) Japanese Manufacturing Investment in Europe: Its impact on the UK economy, Roger Strange, Routledge, 1993

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Mitsubishi Electric in the UK – 1979 to present

In January 1979 Mitsubishi Electric UK took over a colour TV plant in Haddington, East Lothian from bankrupt Norwegian company Tandberg, saving 120 jobs. Exports of colour TVs from Japan to the EU and particularly the UK had risen rapidly in the early 1970s, even though they were restricted to small screen sets. Then demand in the UK came to a sudden end and TV manufacturing in the UK had excess capacity. So the British government encouraged Japanese companies to take over existing plants. Japanese companies also chose the UK for manufacturing in Europe because there were no domestic manufacturers with government connections as there were in France (Thomson-Brandt) and the Netherlands (Philips). (1)

Mitsubishi Electric already had a representative office in London from 1969 and had turned it into subsidiary in 1972. This then became a branch of Mitsubishi Electric BV in the Netherlands in 1996. It has continued as a branch of the Netherlands based European regional HQ since.

By 1987 Mitsubishi Electric had established video recorder production facilities in Livingston, along with many other Japanese manufacturers starting production in Europe, in response to pressure and anti dumping proceedings from the European Commission. (2)

It acquired Britain’s Apricot Computers in April 1990, with a plant in Glenrothes and R&D in Birmingham, employing 442 in 1991. PC production was scheduled to treble to 100,000 per annum in 1993, with exports accounting for 25% of production, half to Japan. (3) Glenrothes was shut in 1999, blaming cheap competition in Asia.

The Haddington plant continued to make colour TVs and also microwave ovens, but when the price of TVs dropped, it was no longer profitable. In 1998 production ended, with 500 jobs lost. Production was transferred to Turkey.

Alister Jack, the then Scottish Tory spokesman on economic affairs, who later became Secretary of State for Scotland, attacked the Labour government on the closure: “There is little point of introducing a New Deal programme if they cannot hold on to existing jobs.”

Mitsubishi Electric hoped to focus on video recorder production and air conditioning at their Livingston plants. However, in 1999 it announced it would cut 6.100 jobs overseas and 8,400 jobs in Japan due to losses caused by falling semi-conductor prices and weak demand for consumer products.

The Livingston operation entirely focused on air conditioning and R&D for Europe moved there in 2013, with Mitsubishi Electric investing £20 million into the operation.

In 2017 air conditioner production started at Mitsubishi Electric’s new factory in Turkey. Thanks to the customs union with the EU, air conditioning exports from Turkey to the EU are tariff free.

Mitsubishi Electric Air Conditioning UK employed over 1000 people In 2019. 77% of its sales of £200m were to non-UK EU countries, 20% to the UK. The plant was profitable despite a large increase in gas and transportation costs.

The UK is seen as a growing market, despite any Brexit impact, because of the need for green, affordable public sector housing. Mitsubishi Electric is dependent on imported components, but it is standard industry practice to hold 2.5 months of inventory, so it is hoping to weather any post Brexit logistics impact.

(1) Japanese Manufacturing Investment in Europe: Its impact on the UK economy” Roger Strange, Routledge, 1993 p 196

(2) ibid p 201

(2) ibid p 264

Photograph of Campbell Gill ~ Personnel Manager and Eric Murray the General Manager with the joint Managing Director Yoshio Noguchi 1984, credit: Angus N Bathgate https://www.facebook.com/groups/oldeastlothain/permalink/2402751853280700

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