Going it alone could taint the UK’s position for investors
British Prime Minister David Cameron’s recent tilting at the windmill of Jean-Claude Juncker’s European Union presidential bid has highlighted—if it were not already evident enough—the gulf between the UK and its European partners over a multitude of issues.
Juncker’s success in securing the presidency of the European Commission suggests that Cameron’s quest for changes that would satisfy the concerns of some UK citizens about remaining within the union is a lost cause.
This is bad news for the prime minister, if there is to be a referendum, as promised, in 2017. That itself is dependent on a Tory victory in the forthcoming general election, due next year, and by no means a given.
The question then is whether another party in government would also look for a referendum. The Labour Party have so far sat on the fence but the UK Independence Party (UKIP) have been really vocal in wanting a referendum, and they want it now. Whatever the outcome of the next general election, the UKIP’s views will need to be taken into account.
At issue is the return to Westminster of powers that now rest with Brussels and a retreat from the “ever-closer union” policies that Juncker is seen to favour. From the start, Britain has resisted this position.
If it comes to a referendum, to choose whether or not to be a member country of the EU, as is currently proposed, voters will naturally look to their local interests. But there is a broader context.
At present, almost 50% of Japanese investment in Europe is hosted in the UK. Yuuichiro Nakajima, managing director of Crimson Phoenix K.K. makes the point: “Should the UK opt to leave the EU, there will be a significant adverse impact on Japanese investors’ perception of Britain as an investment destination”.
Many Japanese firms designate their UK offices as the headquarters for their Europe, Middle East and Africa operations. The UK offers seamless access to the Continent, a business-friendly administrative and tax environment, and London Heathrow Airport is a major global hub.
But, were the UK to leave the EU, many of the advantages of using the country as a regional headquarters would evaporate. In Nakajima’s view, “Japanese companies may choose to scale down their UK presence, opting instead to relocate their administrative and operational functions to Germany, France and other countries”.
A significant number of Japanese manufacturers have already chosen to base their operations on the Continent and, according to Nakajima, Britain ex-EU could see itself relegated to a second league of national markets, such as Norway, Iceland and Liechtenstein.
So a United Kingdom outside the EU would appear to be an unattractive destination for Japanese investors, but is this something of which the man-on-the-UK-street is aware, or about which he even cares?