An exit from the EU could spur Japanese disinvestment
Anyone who has followed the history of Anglo-Japanese relations over the past three decades should be aware of the importance of Japan’s investments in the UK.
These ventures began in the 1970s with electronics makers creating numerous jobs in areas with high unemployment.
Sony Corporation and Toshiba Corporation were significant early investors, with Wales benefitting hugely.
This was in no small part due to the sterling efforts of the Welsh Development Agency’s Japan office working in close cooperation with the British Embassy Tokyo. Both had the unstinting support of the UK government. It did not take long for Sony to become synonymous with Wales.
Arguably the most significant Japanese investments of all, at least initially, were from automobile manufacturers such as Honda Motor Co., Toyota Motor Corporation and Nissan Motor Co., Ltd. It would not be an exaggeration to say that, together, they rescued British manufacturing.
Specifically, they brought much-needed employment to locations such as Sunderland. Jobs were created not just in manufacturing, but also—and perhaps more importantly—for the provision of parts that were compliant with the most exacting of standards.
NSK Ltd. was another major player that believed in the British workforce. The firm implemented just-in-time management techniques and quality controls that had previously not been heard of in the UK.
These investments made important contributions to the British economy, just as Japan-bound UK exports of automotive parts now play a huge role, second only to that of speciality chemicals.
Auto parts are exported elsewhere, too, thereby enhancing the overall image of British industry, which is now seen to be at the leading edge in certain areas where once it was given up for dead.
Indeed, Japan’s confidence in the UK as a place for investment has encouraged others, including the US and Germany, to follow.
To date, it is believed that over 1,300 Japanese firms have invested in the UK. This is much higher than the volume of Japanese investments in other EU countries. Together, those firms have created some 150,000 jobs.
The late Prime Minister Margaret Thatcher, who many people accused of destroying British industry, was quick to recognise the benefits of Japanese inward investment. She was deeply and personally committed to promoting Nissan’s investment in Sunderland.
In many cases, those early investments have morphed; some manufacturing has closed down, while in other cases the emphasis has shifted to either research and development or other areas of business.
Nissan, for example, has its global design centre in the UK, and pharmaceuticals giant Eisai Co., Ltd. chose to locate its latest research facility in the UK.
So Japanese investment in the UK remains vital and Britain still enjoys the lion’s share of Japan’s investments in Europe. But, for how much longer? That’s a question the administration of Prime Minister David Cameron must look at very carefully.
The British government recently conducted an audit of how membership in the EU affects the UK. As part of that exercise, Britain’s overseas partners were also polled. Unsurprisingly, as a major inward investor, Japan’s views were paid serious attention.
What emerged was a clear concern on the part of the Japanese government (no doubt reflecting that of Japanese industry) that the UK might choose to exit the EU and the explicit expectation that Britain would “continue to strive for the completion of the single market”.
There are many reasons Japanese investors feel comfortable in Britain.
The much-touted fact that they are both island nations plays a part, as does the long history of bilateral relations, the 400th anniversary of which is being celebrated this year. And we must not underestimate the importance of the English language.
There is also a significant Japanese population in Britain—some 50,000 people according to recent statistics—and with that have come institutions such as Japanese schools, culture centres, supermarkets and restaurants.
Japanese firms investing in the UK see their presence there as the most convenient way to access the highly lucrative European market, one that is extremely important across a broad field of products and services. Anything interfering with that access would immediately trigger serious discussion in the boardrooms of Japan’s largest corporations.
Any Japanese disinvestment in the UK would have a negative effect on the nations’ bilateral ties, while the impact on employment would be particularly damaging. That is something Westminster must bear in mind as it contemplates a referendum on EU membership.
It is vital that this fact be made clear to the voting public should there be any pre-referendum publicity campaigns.
Every man on the street should understand the importance of Japanese investment in Britain, and the possible consequences of an exit from Europe.
Contrary to what some people claim, it is not a matter of Japanese interference in the UK’s affairs as much as a reflection of how interwoven our global affairs have become.