Brexit: Japanese companies reduce investment in the UK

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Honda (HMC) has become the last to reduce its exposure to the British economy, announcing Tuesday the closure of its only manufacturing plant in the country by 2021, a decision that should result in the loss of at least 3,500 jobs.

The company denied any link to Brexit, but experts in the auto industry said the uncertainty surrounding future access to the market and the pricing risk should have played a role.

Honda bomb follows rival automaker's decision Nissan (NSANF) to abandon plans to build a new SUV model in northern England. Electronic businesses Sony (SNE) and Panasonic (PCRFF) have both announced their intention to move their European legal bases out of the country because of Brexit.

Japanese leaders are fed up after warning for years of the risks inherent in a break with Europe.

"In Japan, Brexit puzzles all the professionals I address," said Paul Bacon, a professor at Waseda University in Tokyo, a specialist in Japan-Europe relations. "It is obvious here that this will cause economic damage and that it creates serious difficulties for the Japanese industry."

Britain is about to leave the European Union in less than 40 days, but Prime Minister Theresa May has failed to gain the support of Parliament for her project, which has fears a disordered departure.

It's infuriating for Japanese companies and government officials who have been demanding for years that British leaders would limit the harmful effects of Brexit.

"Trust has been dispelled" between Japanese companies and the British government, said Seijiro Takeshita, a professor at the Shizuoka University School of Management and Information.

Nissan is eliminating its plans to build a new SUV model in the north of England, citing Brexit as a major factor.

Britain out of the EU "does not make sense"

Japan Inc has injected billions into the British economy. More than 1,000 Japanese companies operate in the country, generating more than 140,000 jobs, according to the latest figures from the Japanese government.

Many of them used the UK as a springboard in Europe. But if the country leaves the unified European Union market ", it is foolish for Japanese industries to base themselves in the UK," said Bacon.

60% of UK trade still exposed to Brexit shock
In the United Kingdom, about 60% of Japanese firms surveyed by In the fall of 2018, the Japan Foreign Trade Organization said it expected Brexit to have a negative impact on its future activities.

Japanese companies tend to invest in the long term but have a very low tolerance for risk, according to Takeshita.

"The current situation in Britain is just that: uncertainty," he said. "Many are backing away."

He predicted that more and more Japanese companies will withdraw as a result of Brexit.

Toyota (TM) warned in December that a British exit from the European Union without an agreement in place would endanger a multi-million dollar vehicle production per day, but did not announce that she would cut her investments.
A car transporter at the Honda Swindon factory.

Japanese banks are also worried.

A senior executive at Nomura (NMR) In November, Brexit was described as a "big concern", which would increase costs and risks for financial companies. Nomura has already started transferring dozens of jobs from London to Frankfurt and recruiting new employees on the European continent.

It's not just Brexit

There are other reasons why Japanese companies are reconciling their commitments to the UK.

Advances in technology mean that automakers can now automate more supply chains. This has made it cheaper to operate factories in Japan, where labor costs are generally high.

Why is Brexit scared of Airbus and BMW: truck lines at the EU border

Nissan announced this month that it would build its new X-Trail SUV in Japan rather than in the north of England.

"Japanese companies are seeing the return to Japan profitable and profitable," said Stephen Nagy, associate professor at the International Christian University in Tokyo.

Honda said it decided to close its factory because of "unprecedented changes in the global auto industry", such as the shift to electric vehicles. He plans to transfer Britain's production to Japan, the United States and China.

Recent trade agreements have also made Britain less attractive to Japanese companies after Brexit.

Nagy spoke about the trade agreement between the European Union and Japan, which came into effect this month, and the agreement reached between eleven Pacific countries at the end of last year .

"The United Kingdom will not be part of [deal], which makes it a much less attractive platform for Japanese companies, "he said.

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