Japanese Business Blog - Rudlin Consulting

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

The number of people employed in the UK by the biggest Japanese companies in the UK rose by around 1% to 76,103 in 2016 – representing over half of the 140,000 or so the Japanese Embassy to the UK estimates are employed overall in the UK by Japanese companies.

Just as 80% of the UK economy is services, so too with Japanese companies in the UK. Although Nissan, Toyota and Honda attract most of the headlines thanks to Brexit – understandably as they represent around 15,000 of the 76,000 jobs – the vast majority of the rest are in the services sector.

Even Sony has only one small factory left in the UK, making high end audio visual equipment and employing less than 100 people. The rest of 3000 or so jobs are in Sony Interactive Entertainment, music and film & TV or in marketing.

Fujitsu is still the biggest Japanese employer in the UK but the gap with Nissan at #2 is narrowing, as Fujitsu have reduced their headcount by over 15% in the past year or so. Although Fujitsu is still seen as an IT & telecomms manufacturer in Japan, in the UK it is largely an IT services company.

Trading company Itochu may be a surprise at #3, but this is largely due to its ownership of tyre fitting chain KwikFit.

The Hitachi group of companies (#7) has grown by 17% over the year – thanks in part to expansion at Hitachi Rail and Horizon Nuclear Power – but the bulk of its employees continue to be at consumer loans company Hitachi Capital.

Dentsu Aegis Network, part of the Dentsu advertising agency, has continued to acquire across the UK and Europe, resulting in a 21% increase in headcount. Other notable increases thanks to acquisitions include Mitsui Sumitomo & Aioi Nissay Dowa acquiring Lloyds underwriters Amlin and of course Softbank, a new entrant to the top 30, with its acquisition of ARM.

The story of Japanese companies in the UK continues to be the story of the UK economy overall – a trend which will no doubt continue in 2017, with Japanese banks already strengthening and relocating to their other European Union based operations, or threatening to do so.

Customised reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa are available – please contact pernillerudlinrudlinconsultingcom for further details.

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The tragic limitations to Japan’s lifetime employment system

Since the suicide of a young female employee at advertising giant Dentsu in December 2015 was deemed to be due to overwork, there has been a rash of articles in the Japanese media asking whether it’s time to change Japan’s lifetime employee “seishain” (regular or proper staff) system (previously blogged about here).

Nikkei Business described the main characteristics of the seishain system as:

No job role boundaries
Long work hours
Pay increases based on seniority

Which results in:

Strict terms of employment, so when there is an an economic downturn, the employee can be reassigned
Seishain as fixed costs, so it is difficult to transfer over non-regular staff into the system
Seishain not being hired into a role, but into the company, so you do not have transferable skills which will enable you to work elsewhere
Irrational human resource allocation because of features of the system such as retirement from line management at 55
Difficulties in utilising seishain who have household or elderly care duties
A reduction in pension and health insurance benefits because of transferring to a smaller company from a larger company
The risk of losing the element of salary that was based on seniority if you change employers
A lack of workers shifting from dying industries to growth sectors

There is still a big pay gap between seishain and non-seishain, and yet the real average pay of all employees in Japan has fallen since 2005 (with 2002 as the base=100, 2015 = 95).

30% of Japanese men and 10% of Japanese women work more than 49 hours a week, compared to 17% in the USA, 18% in the UK for men/6% for women, 16% of German men/4% German women, 15% of French men and 6% of women and 10% of Swedish men and 4% of Swedish women.

The percentage is even higher for Japanese seishain – 40% of men, 20% of women.

A Nikkei internet survey of 1343 Japanese employees revealed that the biggest reason (70%) for overtime was that there was such a volume of work. Just under 40% said there was a lack of people to do the work. Other reasons were that there were particular features of their work requiring overtime, that there were too many meetings, that it was expected of them, that it was difficult to go home if others were working and the least popular reason was “in order to increase pay”.

But as one of the participants said in one of my seminars last week – Japanese employees are very expert at stretching their work out so that overtime becomes necessary. The urge for 100% perfection in the tiniest details is also a root cause I would say.

There are signs of change – some companies have started paying part timers and contract workers exactly the same as seishain and many companies are trying to improve productivity and reduce working hours.

Prime Minister Abe announced in September a Council for the Realization of Work Style Reform – to tackle 9 areas – listed here – in an attempt to address the limitations of the lifetime employment system. Interesting to see that “the issue of the acceptance of foreign personnel” is #9.

Employers need to change to encourage Japan’s milliennials to be mobile

European employers, just as in Japan, are worrying about how to manage and motivate the so-called millennial generation – people who were born between the early 1980s and the early 2000s.

Across the world, one characteristic that unites the millennial generation is, of course, a high use of social media. There is some evidence that this has led to a more open minded attitude to the rest of the world. In the UK, the millennial generation is much more pro-European Union and pro-migrant than the older generations. Millennials are used to building relationships with people they have never met, through mutual interests and hobbies, regardless of their location or nationality or gender.

This has translated into a higher desire than other generations to live, work or study outside their home country. 71% of millennials, regardless of gender, want to work outside their home country during their career, according to a global survey by PwC in 2015. A multigenerational global survey by PwC in the same year showed that all age groups and genders overwhelmingly agreed that secondment early in a career was also critical.

Yet I have seen surveys of Japanese millennials which show that fewer of them are studying abroad or want to be seconded overseas than previous generations. I expect their concern, which is also the top concern of other nationalities, is what their role will be when they are repatriated to their home country.

I suspect there are also assumptions being made on the employer side about who an expatriate should be and what the role should involve. I recently met a British academic who had interviewed various Japanese women living in the UK and she found that many of them joined a Japanese company in Japan, in the expectation that they would be posted overseas. Yet their requests to be seconded were ignored, so they quit their companies and moved abroad themselves.

It seems to me that many of the issues Japanese companies are facing such as attracting and retaining younger people, an ageing workforce or a lack of men or women who can take up global management roles could be resolved by having a more integrated and inclusive approach to job mobility. It is quite normal for European companies to hire graduates from across Europe, and then rotate them around their operations in different countries. A few of our larger clients are now rotating their graduates to Japan too. Global roles do not have to be for 3-5 years in another country – they can be permanent, a few months or indeed a virtual global role.

One of the messages from the campaign for Britain to stay in the European Union – aimed at the millennial generation – is that if the UK leaves the EU, it will be less easy for young British people to study or work in other European countries. Unfortunately, one other characteristic of the millennial generation is that they are less likely to vote than the more pro-Brexit older generations.

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

Why Nissan matters more to the UK than the UK matters to Nissan

It will be interesting to see how far Ghosn’s well documented ruthlessness and unsentimentality which he demonstrated in turning around Nissan in Japan will come to the fore in next month’s decision about where to invest for the new Qashqai, because really, to Nissan, the UK is not as important as a market or a manufacturing base as the UK might like to think. Plus, Ghosn has now got Mitsubishi Motors to worry about as well.

Here’s some figures to illustrate:

UK based employees represent around 5% of Nissan’s global workforce
UK based production represents around 10% of Nissan’s global production and around 70% of its European production (the rest is manufactured in Spain and Russia).
Car sales in the UK market represent around 3% of Nissan’s total units sold worldwide. Europe & Russia represent around 15% of total units sold. So the UK market is about 20% of Nissan’s Europe & Russia regional sales.

From the UK perspective:

Nissan is the third largest Japanese employer in the UK, with around 8000 employees – not only in the Sunderland factory but also several hundred working in design at Nissan Technical Centre Europe in Cranfield (ultimately registered in Belgium so that should make a quick getaway easier) and a design centre in London
Nissan is the 8th largest Japanese employer in Europe – around 16,000 employees in total – so around half are in the UK. However the European regional headquarters is in Switzerland, to which the UK factory sells all its production. The operational headquarters and holding company for the rest of Europe is based in France.
Nissan Sunderland’s plant accounts for nearly 1/3 of the UK’s car production. 80% of it is ultimately exported, 76% to Europe.

And of course there’s the supply chain and the jobs it provides – the UK car industry likes to say it supports around 800,000 jobs.

Calsonic Kansei is a supplier to Nissan, and is also in our Top 30 Japanese companies in the UK, employing over 1300 people – with factories in Llanelli and Sunderland – and Spain. Nissan has a substantial stake in Calsonic Kansei, but the cosy mutually supportive supply chains of 20 years’ ago have long disappeared, thanks in part to Ghosn. So it’s not hard to see Calsonic Kansei and others responding as quickly as they can to any shifts in location of demand.

It’s legendary in Japan that when a Nissan employee went to Ghosn to beg him not to axe one of the suppliers totally dependent on Nissan because it was headed up by a member of their own family, Ghosn responded “which is it to be? That Nissan collapses or your uncle’s company collapses?”

For how complex and tough life is these days in the global automotive supply chain, this comment in the Financial Times recently was very revealing:

“We manufacture part of one component for the Nissan Qashqai. We purchase raw materials from Taiwan, we manufacture in the UK in a Japanese owned factory. Our customer is in Germany, where our product is bonded together with products from other countries. Our customer’s customer is in France, where the bonded component is integrated into a car component. The component is shipped to Sunderland and becomes a part of a “British” car.

How Mrs May and her merry band are going to sort this mess out is beyond me, and I suspect beyond them.

The development time lines for the most basic of automotive components is two to three years, which means that we are already “post Brexit” for new business development. How do I persuade customers to invest in new product development with us when nobody has a clue on what basis I might sell eventually sell my product to them, and given rules of origin, in some cases on what basis they might sell their product to their customer. We have good relationships with our customers, but at the end of the day they are running their business for their benefit and may well decide its just not worth the uncertainty and risk.”

Carlos Ghosn is “reassured” by Theresa May saying that the British government would be “extremely cautious” in maintaining Nissan’s Sunderland UK factory’s competitiveness. But he may nonetheless think some rebalancing is in order.

European pride + global standardization = long debates

The European senior management team of a business which had been newly acquired by a Japanese company complained to me about being treated as if Europe was one homogenous country, when in fact they only had offices in 5 very different countries in Europe, with a headquarters in Germany. “It’s true, we know how to work with each other in Europe – after all Europeans have been living and working together for hundreds of years, but it seems strange that on paper we’re supposed to be a tri-regional structure of Europe, North America and Asia, and yet North America has only two employees and Asia has no regional headquarters, with Taiwan, China, Korea and Japan being managed separately”

This was just a small company, but actually I have seen similar situations in many other much larger Japanese multinationals. It’s partly that Europeans are very sensitive to their status –and want to be treated on a par with other regional heads – and this means the European definition of regions, with Asia as one region.

But it’s also due to a justifiable concern that if the company is meant to be offering global products and services, it needs to have a well-balanced global structure operating off common platforms, systems and processes. If the company grows by acquisition, you often end up with very different portfolios of services and products from country to country, incompatible processes and systems and no clear idea of how revenue and costs should be shared across the regions which are contributing to the global offering.

This can cause huge, long running arguments, partly because standardizing trade, production processes and technology are interrelated issues. Once you decide what products and services are global and what are local, you have the basis for splitting revenue accordingly. But you have to be careful this does not lead to regional organisations focusing on their local products and services, refusing to participate in global contracts because they make more profit out of local contracts.

Once you know what you are offering globally, you can standardise the technology – such as having all the company’s websites running off the same content management system, or production running off the same platforms or sales and purchasing using the same global accounting system.

Sometimes Japan headquarters has to swallow their pride for the sake of speed and efficiency. I was impressed that Nomura, when it acquired Lehman Brothers, decided to move their dealing onto the Lehman platform, because they judged it to be technically superior and faster than trying to integrate platforms or shift everyone onto the Japanese system.

Nobody wants to deal with these problems because they are so complex and lead to fights and easy resistance by those claiming that the global standard is not going to work in their markets. But unfortunately, if you do not deal with these issues soon after an acquisition, they fester and become even more difficult to resolve.

This article was originally published in Japanese for the 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.

Large, stable employers are important for the health of the community, whatever the country of origin

You may remember, though it feels like a lifetime ago given what has happened since, that the front pages of the British business press in early 2014 were full of debate about whether to welcome or be worried by the US pharmaceutical company Pfizer’s bid to take over AstraZeneca, a UK-Swedish company. The £63bn bid would have made it the biggest foreign takeover of a British company in history.

Initially the British government wanted to portray the bid as a vote of confidence in what they had done to make Britain an attractive destination for foreign investment. However, the former CEO of AstraZeneca, Sir David Barnes, said that he was concerned that Pfizer would “act like a praying mantis and suck the lifeblood out of their prey. “ Pfizer wants to move its tax domicile to Britain when it acquires AstraZeneca, to take advantage of the UK’s low corporate tax rate and what is called a “patent box”, which gives tax breaks for research.

If Pfizer want these tax incentives, it should invest in the UK itself, and not attempt to do it via a takeover, Sir David argued. Pfizer last hit the headlines in the UK when it closed down its 60 year old research facilities in the east of England, with the loss of nearly 2000 jobs, in 2011. A few years before that it closed R&D sites in Nagoya, Japan and the US. The reasoning at the time was that research was better outsourced to smaller companies.

I have not heard anyone say that this trend has reversed, yet AstraZeneca committed to investing £500 million in a new research facility and headquarters in Cambridge, which is the main science cluster in the UK. Pfizer say it would honour this investment, and the jobs that depend on it, for five years at least.

The consensus in the UK seemed to be that given Pfizer’s “accounting led” approach, such commitments may not be worth much. The US company Kraft also promised it would not cut jobs when it took over one of the UK’s most famous companies, the chocolate manufacturer Cadburys, in 2010, and then shortly after closed down one of its factories.

This does not mean that the UK is hostile to all foreign takeovers, however. Japanese companies are much more welcome, as they are seen as having long term commitment to their investments. Takeda’s acquisition of Swiss company Nycomed did lead to job losses but this is seen as inevitable after a merger.* It is the wholesale closure of a factory or R&D site with major impact on the community around it which troubles people in Europe.

Many of the British researchers laid off by Pfizer in 2011 have found jobs in small start ups, but not everyone can be an entrepreneur or has the personal resilience to go through the trauma of redundancy. When I ask participants in my training what they like about working in a Japanese company, they almost always mention the stability, the long term view and the loyalty of the company to its staff. Large, stable employers are important for the health of the community, whatever the country of origin.

* Takeda announced it would close its Cambridge Science Park R&D facility in August 2016. R&D activity will be concentrated in the US and Japan, and the UK will move from global coordination activities to European only. I wonder how long that will last if the European Medicines Agency moves out of the UK however.

This article originally appeared in Japanese in the Teikoku Databank News on 11th June January 2014 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.

Brexit business opportunities for Japanese companies

A couple of Japanese expatriate business people with whom I was having lunch with recently both remarked how surprised they were that their British colleagues were quick to recover from the Brexit shock and think positively about the business opportunities it might bring. I too have been trying to be positive and have been doing some further research into how Japanese companies are evolving in the UK. The opportunities I have identified for Japanese companies in the UK are:

1. Africa and the Middle East

The UK has historic ties to Africa and the Middle East, which means that is still a good base for coordinating activities across those regions as there are many expatriates from and experts in those regions, who live in the UK, and are sources of information and management capability.

The UK government is going to be looking to boost trade to non-EU countries, as a counterbalance to any negative impact from Brexit on trade with the EU, so there is likely to be plenty of support for developing business with these regions.

It might even be easier than before to hire people from those regions in the UK. Although a vote for Brexit was partly to stop immigration to the UK, this was very much about preventing lower skilled people from Eastern Europe living in the UK. Most Japanese companies were not hiring such people in the first place, so I doubt any restrictions on this kind of immigration will have much impact.

Japanese financial services companies are already changing the status of non-UK branches to a European Union branch or incorporated subsidiary, and are strengthening their African operations, but it looks like those operations will still be reporting into the London office, which will act as an EMEA coordination function.

Japanese manufacturers have already shifted lower skilled, labour intensive production eastwards in Europe or to Africa and I assume Brexit will accelerate this trend, with the UK being a regional hub for engineering design and development expertise

2. Infrastructure

Despite the fact that manufacturing has moved eastwards or south to Africa, the British government is well aware that British people desperately want well paid, secure manual worker jobs to return to the UK. The most obvious way to do this is through public sector investment in transportation and energy. Hitachi and other such infrastructure companies should still find plenty of business, although it is not clear what will happen to EU funding for energy and transport infrastructure projects.

3. Acquisitions in the UK

As Softbank’s acquisition of ARM proved, there are still companies in the UK which are attractive acquisition targets, not as a gateway to the Single Market but because they are unique in terms of their brand, technology or expertise. For example, food and drink brands unique to the UK, Lloyds underwriters and UK advertising agencies have all recently been acquired by Japanese companies. It seems likely the weak pound and strong yen will continue for a while, so there may be some bargains for the brave.

This article originally appeared in Japanese in the Teikoku Databank News on 14th September 2016 and is also published in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Japan – into Africa

Many Japanese companies have set up European regional headquarters, largely in the UK, Germany or the Netherlands and use this as a base for consolidating their administrative activities across the region. Increasingly these days the designated region covered is not just Europe, but EMEA – Europe, Middle East and Africa. The historical ties that the UK in particular has with Africa and the Middle East, means that it is not only easy to access the Middle East and Africa from London, but also that it is relatively easy to get hold of information about countries in those regions in the UK as there are many expatriates and experts on those countries based in the UK.

One such expert is Professor Sir Paul Collier, a professor of economics at Oxford University, whose speech to a group of Japanese businesspeople in London I attended a while back. Sir Paul had met Shinzo Abe at a G8 meeting, and his speech was largely in support of the recent initiatives by Abe and Japanese businesses to become more involved in Africa, recently reinforced by the TICAD meeting in Nairobi.

He is realistic, however, saying that “I am not going to tell you Africa is wonderful. Africa is complicated and has a small economy, but it has got significant opportunities.” The opportunities fall into four main areas – natural resources, the infrastructure needed to exploit those resources, growth in sectors such as electric power, construction, consumer goods and the “e-economy” such as payments by mobile phone.

He also pointed to the specific attractions that Africa would have for Japan. Firstly that as African growth is very commodity price dependent, and Japan is a big commodity importer, having investments in Africa is a useful “hedge” against commodity price movements. Secondly, Japan is apparently welcome in Africa. “Africa is tired of Europe and doesn’t like being told what to do”. The USA behaves like a colonial power but does not have any money to invest into Africa. China was hugely popular in Africa 10 years ago, but apparently many African leaders are now feeling frightened of becoming too dependent on China and are trying to push back on deals.

The biggest negative for Japan, in Sir Paul’s opinion, is that culturally, “Africa is Japan upside down. Japanese society is one of very high trust and very high social cohesion, and Africa isn’t”. And of course, Africa isn’t one country but 54 countries and the levels of opportunities and risk vary considerably from one country to another. Sir Paul’s recommendations were to focus on Lagos and Nairobi, with possibly a sub office in Rwanda. With regard to corruption, the risk is reputational rather than financial, and he recommends having a policy and making it very clear to counterparts what that policy is.

He also reinforced the view that approaching Africa from the UK was a good tactic. “The UK, public and private sectors, have the knowledge, network and the contacts but not the products that Africa wants.” Japan has those products, so, teaming up with the British should bring plenty of mutual benefit.

This article originally appeared in Japanese in the Teikoku Databank News on 14th May 2014 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.

At a stroke, the Brexit vote has increased Japan’s perception of the risk of investing in UK and EU

Japan’s (heartfelt) message to the UK and the EU regarding Brexit surprised many by its directness and the way it was shared publicly. Not so surprising was the underlying theme, of wanting to maintain arrangements as they are. As is often said, business (and particularly Japanese business) hates uncertainty. Companies and governments desperately want to be kept in the loop of any developments so they can make plans accordingly. As Japan’s message pleads: “we request the both [EU and UK] to heed the voices of Japanese businesses to the fullest extent… some Japanese firms may not be able to respond sufficiently to the drastic changes in the business environment that could be caused by BREXIT and they also have difficulty in articulating their requirements publicly”.

As well as this hint that Japan worries it is not listened to, and is not good at putting its case, I also get a whiff of a feeling of betrayal and loss of trust. “In light of the fact that a number of Japanese businesses, invited by the Government [my italics] in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.” Well it made me wince, and I hope it made our government wince too.

Having spent some time working in the regional coordination department of a major Japanese investor in the UK, I know full well how much political and economic risk factors are constantly reviewed and investments made or retracted accordingly by Japanese multinationals. Softbank is the exception rather than the rule when it comes to appetite for risk amongst Japanese companies.

I know Brexit supporters will immediately counter that Japanese companies are highly unlikely “to cut their noses off to spite their faces” by closing down operations and moving away from the UK when the UK represents an important market for their products. Furthermore, they will no doubt argue that the much cheaper pound will counterbalance any 10% tariffs if we revert to WTO rules.

Foreign Direct Investment (FDI) matters more than trade in terms of Brexit impact, in my view. Increased trade volumes are an outcome of FDI in these days of integrated supply chains, not the origin of economic prosperity as they might have been in some mercantilist world of the past. The voice of every economics teacher I have ever had (from O level to MBA) keeps echoing in my mind: “an export is simply a means to buy an import”.

Foreign Direct Investment (FDI) is an ongoing process, not a one off. What matters is not just whether any more Japanese companies will invest in the UK (they will, if there’s something alluring in its own right above and beyond being part of the Single Market) but where they will put further investments.

To me, what really matters is the jobs that result from investment in existing operations and the trade that investment generates, not trade on its own.

So with that in mind, here’s my analysis of what a hard Brexit (ie tariff barriers, loss of financial passporting, end to freedom of movement) might mean for our Top 30 Japanese companies in the UK. We have ranked them according to the number of employees, including employees at any acquisitions and subsidiaries and together they represent nearly 90,000 of the 140,000 or so jobs that Japanese companies directly generate in the UK.

My conclusion in short is that Japanese companies will probably be able to adjust to a hard Brexit better than they might fear, and the direct impact on British jobs might not be so severe, except in the automotive industry, and even then, it will be a longer term impact.

But, 20 out of the Top 30 Japanese companies in the UK are regional headquarters. If a hard Brexit means that the centre of the action – in terms of regulatory influence, access to a diverse and talented workforce and selling into a large and growing market – shifts to the continent, then those regional headquarters will shift too, and with them will go the purchasing power for all of those services which the UK has become so good at providing – not just financial but legal, consulting, IT, R&D and creative.

If our trade negotiators really can pull off some good deals with the Middle East and Africa, the best defensive countermeasure UK regional headquarters can take is to position themselves as EMEA headquarters. Many of them already cover not just Europe, but the Middle East, Africa and in the case of IT companies such as Fujitsu, India too. But I worry that this will not be enough, given the relative size of these markets.

Technology companies (9 of the Top 30) such as Fujitsu, Hitachi, Sony, Ricoh, Canon, Fujifilm, Konica Minolta, Olympus and Toshiba have been increasingly moving from B2C to B2B and from products to services in the UK and no longer mass manufacture consumer products in the UK. Sony’s last manufacturing operation in the UK, in Wales, produces professional audio visual equipment. The bulk of Sony’s employees are in Sony Music or Sony Computer Entertainment, or in the European sales and marketing operation. Ricoh’s Telford factory produces 3D printers. Fujifilm’s facility in the UK is nothing to do with cameras – it is a contract drug manufacturer for the biotech industry. Hitachi has shifted away from TVs and other consumer electronics and has its global rail headquarters in the UK, with a rail vehicle assembly manufacturing facility recently opened in Newton Aycliffe, as well as being the owner of Horizon Nuclear Power.

Canon’s European HQ already moved from the Netherlands to the UK a few years ago, and no doubt the Netherlands would like it to move back. There is a constant tug of war between Germany and the UK for Fujitsu’s regional power centre. Olympus has Keymed in the UK, but its regional HQ is in Germany. Toshiba splits its regional HQ by business between Germany, Netherlands and the UK but is currently restructuring. Konica Minolta’s regional HQ is Germany anyway, as is Fujifilm’s. Hitachi (UK HQ) has just acquired an Italian rail company, so could use that as a European Union base.

Prediction: even a hard Brexit might not have that much impact on Japanese technology companies (who are mostly headquartered in Germany anyway), as in the UK their businesses have already moved into high end, high margin, relatively price inelastic segments, drawing on specific local expertise. Their regional HQs may feel pulled back towards the continent however, particularly in B2B businesses.

Automotive companies (7 of out the Top 30) such as Nissan, Honda, Nippon Sheet Glass, Toyota, Yazaki, Denso and Calsonic Kansei all have factories in other parts of the EU or inside the EU customs union (ie Turkey). Nissan (headquartered in Switzerland) has a factory in Spain, Honda (HQ in the UK) has a factory in Turkey. NSG (acquired UK based Pilkington) makes automotive glass in Finland, Spain, Italy, Poland and Germany. Toyota (HQ in Belgium) produces vehicles in France, Turkey, Czech Republic and Portugal. Yazaki (HQ in Germany) doesn’t have any factories in the UK anyway (but plenty of sales engineers). Denso (HQ in the Netherlands) has 2 factories in the UK but also in Spain, the Czech Republic, Hungary, Turkey Italy, Poland and Portugal. Calsonic Kansei (UK HQ) also has 2 factories in the UK but also in Spain and Romania. Nissan, Honda and Toyota all export around 75-80% of what they manufacture in the UK, mostly to the European Union.

Prediction: investment for production of new models will go to factories in the EU. As much as a consequence of this than any tariffs, production volumes and jobs in vehicle factories will slowly decline in the UK to a level which mainly supplies the UK domestic market, but this may not be a viable production volume so plants may have to close. Parts manufacturers will cut production and sales engineers in the UK accordingly. Automotive design, a traditional strength for the UK, may even have to relocate to the continent, to be near to the regional HQs and the main markets.

Financial services companies (7 of the Top 30) such as Nomura, Mitsubishi UFJ Financial Group, Mitsui Sumitomo & Aioi Nissay Dowa, Sumitomo Mitsui Financial Group, Mizuho Financial Group, Tokio Marine Holdings and Sompo Holdings are all headquartered in the UK, but all already have other offices in EU countries. Some already have, and others no doubt will, strengthen their operations in EU, transfer some functions and apply for passporting for other offices. Amsterdam seems to be a favourite (both MUFG and Mizuho have licensed offices there), both for its regulatory environment and also because of the ease of using English, plus long standing friendly relations between Japan and the Netherlands. The insurance companies MS&AD, Tokio Marine Holdings and Sompo Holdings have all recently acquired Lloyd’s Underwriters and London is the historic heart of underwriting, so it is hard to imagine their operations in London fading away that much. Swiss Re and Zurich are both headquartered in Switzerland, outside the EU – so life outside the EU is possible in insurance and could be viewed as an escape from burdensome EU capital requirements.

Prediction: UK HQs position themselves as EMEA HQ. EU functions move to an EU-based capital. Some reduction in high paying top level jobs in UK. Back office jobs might stay in UK if sterling stays cheap but there could well be a drift eastwards to Poland or even India.

Companies who own major UK brands (5 out of the Top 30) such as the trading company Itochu (who own Kwik Fit), Japan Tobacco (Silk Cut, Mayfair etc), Suntory (Lucozade, Ribena), trading company Mitsubishi Corp (Princes Foods), Mitsubishi Chemical Holdings (Lucite). Japanese trading companies (Mitsubishi Corp, Mitsui, Sumitomo Corp, Itochu, Marubeni) have always had their regional HQs in London for 100 years+ in some cases and they usually cover Africa and the Middle East from there too. Although they are very traditional, I know, as an ex employee, that the debate never stops about how to structure and where to invest in their global operations, and the political and economic risk that Brexit has introduced may well tip the balance not just away from the UK but away from Europe and back to Asia again. Furthermore, for certain of their business lines such as chemicals there has always been a strong pull to Germany. Mitsubishi Chemical Holdings is headquartered in Germany, and although Lucite is in the UK, it is a global business in terms of operations and customers.

Japanese companies tend to be honourable, even sentimental about keeping the operations of brands in the country in which they were born. Having said that, Japan Tobacco (headquartered in Switzerland) has shut down the last of its former Gallaher UK factories in Northern Ireland recently. Suntory’s CEO is a Harvard Business School graduate with a correspondingly unsentimental view of business and as Suntory also owns Jim Beam and Orangina, it may not feel that wedded to the UK as a regional base. Kwik-Fit may seem quintessentially British, but is in fact a market leader in France and the Netherlands too.

Prediction: Japanese companies are getting less sentimental and more globally hardheaded. They will do what they have to do in search of stable growth.

B2B services suppliers – The remaining 2 companies in the Top 30, Dentsu (advertising) and NYK (logistics) have different histories as well as businesses. Dentsu has been on an acquisition rampage recently, and has formed out of its acquisition of Aegis, the Dentsu Aegis network, headquartered in the UK. The UK is traditionally strong in terms of advertising and marketing expertise, but again, the industry will have to follow wherever its customers go, so if more Japanese clients shift their headquarters to the European continent, I would expect Dentsu Aegis headcount to follow. Although advertising, PR and marketing agencies like to claim they can work globally, my experience is that they are not quite so globally integrated as they seem – wherever the client budget is will be where most of the work is being done.

NYK has both shipping and ground logistics arms – both very integrated into the automotive supply chain. Again, they will have to follow their customers.

Pharmaceutical companies – none of the Japanese pharmaceutical companies employ enough people in the UK to be in the Top 30. The biggest is Astellas, which has its EMEA HQ in the UK, but also a strong R&D and manufacturing operation in the Netherlands. The well documented concern for pharmaceutical companies is that the European Medicines Agency will move out of the UK with Brexit, probably to Spain, as Spain has plaintively pointed out that it does not host any EU agencies. Eisai also has a major R&D campus in the UK. Takeda has already announced it is closing its Cambridge R&D facility. I would expect a major negative impact if the EMA moves out of the UK.

Regional headquarters tend to do business with other regional headquarters. If a hard Brexit means Japanese and other multinationals shift their headquarters out of the UK, the negative impact for the UK will be deep and far reaching.

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Why the British and the Japanese are less productive than the Dutch

When I was visiting the Netherlands last week, one of the Japanese managers I met said his main concern was how to motivate his staff. I hear this question often from Japanese managers working in Europe, and I always want to ask – what do you mean by motivation – what would it look like?

Usually a motivated employee is thought to be an employee who makes an effort and perseveres. This is hard to measure objectively, and it is a worry amongst Europeans that Japanese managers evaluate employee motivation by how many hours employees are at their desk. This is a justified concern, reinforced recently by a report I heard regarding a Japanese GM in Spain who was worrying why his Spanish staff were away from their desks far more than Japanese or even British staff.

If you ask Dutch people what motivates them, according to a long-standing Japanese resident in the Netherlands, they will say “boss, just don’t waste my time.” In other words the main way to demotivate the Dutch is to waste their time.

The Dutch have high productivity (usually defined as GDP per hour worked), and also the happiest children, according to various OECD and UNICEF surveys. The connection between the two is pretty obvious when you look out of the window in Amsterdam – the streets are full of mothers and fathers on their bikes, with their children in little carts or on a tandem, going to and from school. Dutch families like to eat supper, together, at 6pm. They also like to spend the evenings doing sports or other hobbies – and allow their children plenty of freedom to come and go as they please. The streets and housing seem clean, safe and spacious, with offices, schools and housing all mixed together, so commuting time is relatively short.

The Dutch people I met said it was quite normal to work one or two days at home, particularly those who had jobs which required regional or global coordinating activities, so didn’t need to be in the office to see their team. It is also quite normal for men and women to work part time if they have children, but retain their management roles. So in other words the best way to motivate Dutch employees is to ensure they feel productive – that they can get a lot done in a short amount of time.

However, I overheard a pair of British managers in the hotel at breakfast talking about their Dutch colleagues. They agreed – “the trouble is, although the Dutch are efficient at getting things done, they just wander off on their own and do it, and you end up with everyone going their own way, it’s really hard to coordinate.”

Maybe this is why Japanese and British productivity, particularly in the services sector, is lower than the Dutch. We spend a lot of time coordinating and monitoring other people’s work rather than producing added value ourselves – perhaps too much time?

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

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