Leaders February / March 2010

UK and Japan Prospects for 2010

One effect of the crisis in the UK has been to remind those who might have forgotten of the importance of business to the UK.

British business in Japan needs no reminding, of course, that the UK — the world’s 5th-largest economy, 6th-largest manufacturer and home to the world’s most international financial centre — has been hugely affected by the economic crisis of 2008–2009, as has Japan. With citizens of the two countries reading each others’ newspapers and comparing notes about their experiences over the past 18 months, tales of difficulties abound.

But as we enter 2010, cautiously optimistic that there might be a solid return to economic growth this year, it is worth reflecting on some of the events of the past year and lessons we have learnt, as well as to think clearly ahead to what we need to do in 2010. This year will be an important one for the UK, with a general election to be held by June. And in Japan, the Upper House elections in July will be a key moment for the government. Closely watching developments will be business in both countries.

In the UK, the impact of the crisis was felt quickly. Having absorbed some of the lessons of how Japan handled its post-Bubble economy in the 1990s, the UK government responded quickly, at national and international level. Bank recapitalisation; new financial regulation; tax payment extensions and finance guarantees for business; government investment in infrastructure and a low-carbon society; and market incentives, such as vehicle-scrapping schemes have all helped firms get through the crisis.

One effect of the crisis in the UK has been to remind those who might have forgotten of the importance of business to the UK.

Unemployment has risen, but only to just over 7%. Consumer spending and house prices have dipped, but not plummeted. It’s been tough, and there have been some sad disappearances from the business world, but compared with the abyss we feared a little over a year ago, the reality has been more manageable.

One effect of the crisis in the UK has been to remind those who might have forgotten of the importance of business to the UK. Lord Mandelson, who visited Japan in October, has championed that as Secretary of State for the Department for Business, Innovation and Skills. He has pushed the government to do more to help UK industry thrive in the economy of the future, with initiatives on low-carbon industries, digital Britain, and life sciences. With this January’s “Going for Growth” strategy paper, he has brought different strands of government together, to ensure that we promote entrepreneurship; develop the country’s skills base; invest in infrastructure; promote open and competitive markets; and build on our industrial strengths.

My organisation, UK Trade & Investment (UKTI), supports about 20,000 British businesses every year, and helps about 500 overseas firms invest in the UK. We give concrete support on the ground, from finding customers, agents and partners for British business in countries such as Japan, to using embassy properties like the wonderful British Embassy in Tokyo for corporate marketing events. We also support investors to the UK, with financial support for investment in parts of the UK, to training and infrastructure.

And what of the future, and what of Japan? It’s beyond my role to guess the outcome of the elections, either in the UK or Japan. But I am confident that any future British government will remain consistently in support of British business; will continue to promote more open markets around the world; and will continue to champion the UK as the most open place for inward investment from around the world.

This, in turn, is going to mean that Japan remains important for the UK. Japan will face an existentialist moment this year when the Chinese economy becomes the second largest in the world. China’s economy overtook that of the UK some time ago, and although it may hurt the national ego a little to slide one place in the rankings, we welcome Chinese growth — it gives us more opportunities: more sales for British business; more investment from Chinese firms, and more Chinese students going to Britain. Britain now exports more goods to China than to Japan, although our total exports to Japan are higher.

So what matters is not the rankings, but what is actually happening on the ground. When we in the UK look at Japan, we still have great ambition for our trading relationships. We want to see an increasing number of British businesses making money in this market and, of course, more members of the British Chamber of Commerce in Japan. We want Japan to become more open to investment from overseas, to rid itself of some of the non-tariff barriers that UK and other foreign companies find. We’d like to see some UK players become real No. 1 players in the domestic Japanese market. Dyson has done it; so have others. Others still are close. We’d like to see even more. We’d like to see All Nippon Airways and the new Japan Airlines buy Airbus planes and the Japanese Ministry of Defence choose the Eurofighter Typhoon. We’d also like to develop the business relationship — from creative industries, to healthcare, to aerospace, to finance. We at UKTI believe that’s what British business would like, too, and it is my team’s job to try to help you achieve those dreams.

In the other direction, we again have great expectations for Japanese investors into the UK. British business knows how important Japanese investment has been to the UK over the past 25 years. Half of the cars made in Britain are from Toyota Motor Corporation, Nissan Motor Co., Ltd. and Honda Motor Co., Ltd. There are 50,000 Japanese living in the UK, by far the largest Japanese community in Europe. Japan, which accounts for 20% of the world’s spending on research and development, does a lot of that spending in the UK — in its universities and elsewhere.

Looking back on 2009, there were lots of disheartening headlines, but there were also a lot of good ones from Japan for us. Toyota announced it would make hybrid cars in Derbyshire, and Nissan is building a battery factory for electric cars in Sunderland. Hitachi won a major rail contract, and will be manufacturing trains in the UK, which represents a major development for the UK-Japan rail industrial relationship. In Hatfield, Eisai opened a pharmaceuticals manufacturing plant that employs 600 staff, has R&D operations and functions as a headquarters. Panasonic opened a new European Design Centre in London, while Nomura took over Lehman Brothers’ failed operations in London.

Looking ahead, we want more. We hope that Honda and Nissan, too, will begin low-carbon vehicle production in the UK. We hope that Japanese industry will be part of the major developments in UK offshore wind power generation. In addition, we want Japanese technological partnership with the UK’s new nuclear-power programme. And that’s just for starters.

The BCCJ turned 60 in 2008. In Japan’s culture, that marks a moment of rebirth, and many in business and in government will look back on 2008–2009 as a moment when they had to re-examine what they were doing, and make a new start. As we begin the 62nd year, we will look forward with confidence to supporting British business — in the UK and in Japan — making sure the business relationship between two of the world’s largest economies contributes to the prosperity of our respective citizens.

[greybox]British firms wishing to know how they can be helped by the UKTI teams at the British Embassy in Tokyo and the British Consulate General in Osaka, should contact: