The number of Japanese companies and their employees in the UK is starting to decline. Given that this is against the trend elsewhere in Europe, it is hard to avoid the conclusion that this is a reaction to Brexit.
Brexit has put up barriers to the UK trading within the Single Market, damaging sectors it used to have a comparative advantage in such as automotive manufacturing and financial services. The UK is now left with its global strength in services such as professional services, IT, design, marketing and education. It remains to be seen how much of this strength was also reliant on being part of the Single Market, in terms of being able to sell those services to the EU and benefit from the freedom of movement of the people providing or benefiting from those services. So far, Japanese companies seem to be happy to continue to access these services by basing their regional head offices in the UK, regardless of Brexit, or through acquiring British companies in the services sector.
The decline is from a high base. The UK has the highest stock of Japanese foreign direct investment, the highest number of employees of Japanese companies, and the most resident Japanese nationals in Europe.
The decline in numbers of Japanese companies in the UK is mainly due to a reduction in Japanese companies in the manufacturing and financial sectors. There has also been a drop in the number employed in automotive manufacturing. On top of this, the main driver of the past few years behind the rising employee and company numbers – big-ticket M&As followed by expansion in employee numbers – has been less of a force more recently.
To understand more about the trends in Japanese companies in the UK in terms of investment and employee numbers, how this compares with Germany, France, the Netherlands and Italy and what this might mean for the UK in future years, please download our report below:
Japanese companies in the UK
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