Honda, the Brexit and the collapse of the love story between Japan and the United Kingdom

Getty Images / Caspar Benson / WIRED

JJapanese companies are moving in packages. When a Japanese auto company will head to a new country, Japanese companies will be supplying the entire automotive supply chain, as well as banks, trading companies and insurance companies. will quickly follow the demand of their compatriots.

On February 19, Honda announced the closure of its manufacturing plant in Swindon by 2021, resulting in the direct loss of 3,500 jobs and thousands of additional jobs in the supply chain. The concern is that Honda is an indicator. Will the companies that have arrived together also leave together?

The first big Japanese company to plant a foot in the UK still exists: Fujitsu, one of the largest Japanese employers in the UK, acquired a significant share of International Computers Limited in 1990, a year after the opening of the Honda production site in Swindon. Honda had gained a foothold in the country in the previous decade, calling on line employees of the bankrupted British factory Leyland to bademble its Ballade supermini. "It's at the invitation of the British government to come and help us," says Rudlin – an attempt to support the troubled UK auto industry.

Since then, Japanese companies from all sectors have used Britain as a base and stepping stone to Europe. The worry is that Honda is a warning – and not the first one – of the change of opinion in the Japanese business world. "When the British pillars start to disappear, it's worrying," says Rudlin. Honda is the first, but many others are ready to leave or have already begun relocating their production and premises.

Honda could be the big canary of the coal mine: those who are aware fear that Japanese companies will discreetly dissociate themselves from the fabric of British society, 30 years after they first established themselves in the United Kingdom. From Swindon to Sunderland, from auto insurance to Japanese companies are suddenly cold in the UK. Why they do it may seem obvious to many, but it's not something that we do not want to admit.

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EIn January, the Japanese Chamber of Commerce and Industry of the United Kingdom organizes its New Year's Eve party at Draper's Hall in London. Sucker-driven and optimistic, this is a chance for the more than 400 Japanese companies represented by this organization that do business in the UK to meet and chat.

Under opulent oil paintings and long-haired carpets, representatives of some of the largest Japanese employers in the UK are gathering to discuss the future. "It's positive, booming and packed, even despite the outcome of the Brexit referendum," said Rudlin. A few weeks after this year's party and 80 km drive west of the guild hall, the atmosphere of Honda's Swindon factory is much quieter.

The factory is a huge bazaar of buildings on a site where the Spitfires were once destined for Britain's war effort, but has for almost 30 years been an essential base for Honda's European operations. When the plant is at full speed, two million components pbad from warehouses to the factory where they are badembled and leave the production line as a fully formed Honda Civics.

Three-quarters of the individual elements combined to travel a Honda Civic to Swindon from continental Europe via Eurotunnel. Others come from a network of suppliers employing thousands of people across the country. Getting these parts to Swindon may become much more difficult after Brexit, which partly explains why Honda announced this week that it would stop producing cars at the factory.

"Production immediately stopped and most people came home crying," says a Honda worker, employed by the company at the Swindon plant for less than a year. Like many Honda employees who I tried to talk to, he asked not to be named. Unite, the union that oversees negotiations between Honda and its workers who will soon be fired, also declined to propose workers, citing concerns about the impact that this could have on their future position in the US. business.

"It's a difficult feeling without a doubt – especially for those who have worked [there] for over 15 to 20 years, "said the anonymous worker, who was scheduled to return to work on Saturday to learn more about his fate. "It's different for me, because I've been working for Honda for less than a year and because in the country where I used to live, shutting down a plant was a normal thing," he says. "For the British people, yes, it would be difficult. And life in Swindon will change soon.

Life in Swindon will not be the only thing to change if Honda is the first sign of a wider Japanese withdrawal. With $ 56.2 billion (£ 43 billion) of foreign direct investment in the country in 2016, Japan is the seventh-largest investor in the United Kingdom, more than Ireland, the most 39, Australia and India combined.

The United Kingdom imported goods valued at $ 14.5 billion (£ 11 billion) for Japan in 2017. Gold (20% of the total) accounted for $ 9 billion. essential value of imported items, with cars (14%), car parts (5.4%) and engine parts (2.2%). Japanese automakers such as Nissan, Honda and Toyota then use the UK as a springboard to the rest of Europe: 46% of cars exported from the UK in 2017 ended up on the continent.

The entanglement between the two countries began because Japanese companies adored the United Kingdom's access to the European single market, says Ilona Serwicka, research fellow at the UK Trade Policy Observatory, based at the University of Susbad .

But it was more than our stepping stone into a market of 500 million European consumers that was attracting Japanese companies to our shores. The United Kingdom was well placed on the world map, a bridge between the time zones of Japan and the United States. "There was an idea of ​​a club trick: they entrust certain things to the United Kingdom, which then entrusts them to the United States," says Rudlin.

Japanese companies were not only in a sales market: they were buying talent from all over Europe. Japanese companies have set up their European headquarters in the UK, partly because of the strength of its service sector, but also to be able to hire the best workers from all over Europe to improve their productivity. Feeling has also played a role. "They have always felt that Japan and the United Kingdom are similar," said Rudlin. "The island nations with imperial past, both anxious not to be very direct, brutal or macho. We are both very polite and indirect. They like all that.

This indirect nature and this desire to avoid confrontation have blurred the tracks behind the great Japanese exit of the British business sector in recent years. Ian Howells, Honda's European boss, told the BBC that "it's not a Brexit problem for us". But experts say it's just Japanese politeness and an attempt not to cause problems to a foreign government. "People claim it's just a global trend," says Serwicka. "But it's not.The Brexit is definitely part of the history of Nissan and Honda."

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WA few weeks before the announcement of Honda's plans, Nissan announced that it would not manufacture the X-Trail SUV in its Sunderland plant, although the government badured it that it would be protected after Brexit with a £ 61 million state aid working in the North East. Instead, work on this model will be repatriated to Japan, with Nissan's 7,000 workers in Sunderland facing an equally uncertain future. Nissan has attributed its decision to "the lingering uncertainty surrounding the UK's future relations with the EU".

This is not the only bad news to affect the north-east of England, which voted mainly for the exit of the European Union. Hitachi recently moved its global headquarters to the UK and was ready to build London Underground trains at a Newton Aycliffe facility. This contract was lost by Siemens, which has since announced not to build trains in the UK. "It made them shit," says Rudlin. Hitachi has since acquired various Italian railway companies and established positive relations in this country. Although the relaxed Italian style of work and the highly regulated Japanese lifestyle may seem contradictory, relations between strangers have flourished.

Rejected amateurs are also more likely to make reckless decisions: Hitachi Europe was also scheduled to work on two nuclear plants in Wales and Gloucestershire until both projects were frozen. Horizon nuclear power projects reportedly employed 9,000 workers in the construction process. "There is a glimmer of hope," says Rudlin. "They said they were freezing it and there was apparently another way to finance it, but the British government is currently distracted by other things."

Every new announcement has been a blow to the future of Japan-UK trade relations, but Japanese non-manufacturing companies that have established themselves in the UK are also preparing for Brexit by placing one foot in the UK. Continental Europe. Japanese insurance companies and marketing agencies have started to buy British companies, but are also creating alternative seats in Paris, Luxembourg, Amsterdam and Frankfurt to trade with the rest of Europe .

While British negotiators spent their time between Westminster and Brussels, they were neglecting bigger companies based closer to home – a potential insult to the Japanese, for whom personal relationships and dedication play a big part in decisions. commercial. "The views of others have not played any role in the way the government has handled the Brexit debate," said David Henig, former Mandarin of the British government, who helped set up the referendum of the ministry. of International Trade after Brexit before leaving the premises. the government in 2017. "We have moved to the British forefront, and you pay a price if you do not really care what others think of you."

"The transfer of Brexit has been overwhelming for the Japanese. So we have Honda and Nissan, "Serwicka said. Henig agrees: "It was always a difficult situation, but I think Japanese companies and the government continually asked for rebadurance and had not received it. What will they do next? They will get their excuses and leave. It is still unclear whether Japan's rulings bode well for broader issues ahead, such as Honda's, which could affect all Japanese companies.

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WWhile Rudlin worked at Fujitsu, she noticed a change in the way the company operates. Virtual teams and remote work meant that not everyone needed to work in the same UK office to work together. Instead, employees could spread across a continent. The colleagues could be based in Bristol, Berlin and Bratislava and all would work under the auspices of a centralized team. At the same time, market forces oppose low-skilled workers and manual workers. "I think that if Brexit had not arrived at this trend [of downsizing low-skilled or manual labour] would have continued but in a different way. You will continue to see Japanese companies set up their headquarters in the UK, but the number of people that would imply would decrease slowly, "she says.

Honda's European director may have told the truth, at least in part, when he stood in front of the TV cameras and claimed that Honda's decision was not a direct consequence of Brexit. "I do not think everything is related to diesel sales or Brexit," says the Honda anonymous worker. "For me, the Japanese just want to produce the same product at a lower cost. I would not be surprised if they build a new factory in a cheaper European country. "

The news has been tough, but for this employee at least, the future is promising. He will continue to work for Honda until he gets a valid offer – and a few days after the announcement of this announcement, there are two or three per day via LinkedIn. "I'm lucky because of my qualifications," he says. "Things will be bad for unqualified people."

The UK could face more days like this. "Frankly, that could be anyone," said Henig to the question of which country's business representatives could be next to cancel their plans for expansion in the UK. He points out that a pre-existing free trade agreement with South Korea will not be renewed in the event of a Brexit without agreement as a potential next crisis. "There are a lot of countries that think we do not really care, so you could really see more countries saying the same thing."

The problem does not concern individual trade negotiators, but rather a political malaise that has affected the whole country – and is now damaging its reputation around the world. "These things happen at the political level – or rather, they do not happen at the political level," Henig said. Distracted by the enormity of Brexit, things like keeping foreign investors smooth and rebaduring them that the consequences of any departure on March 29 will not hurt their bottom line have been neglected.

The plans to become Singapore's West by creating a low-tax post-Brexit economy are also short-sighted, especially for Japanese companies, Rudlin said. "They shot themselves in the foot. A low corporate tax rate is not a good thing for Japanese companies. "On the one hand, Japanese rectitude prevents them from being considered fraudsters. But the Japanese government has also recently introduced a new law stating that companies whose affiliate outside Japan generates big profits on commissions because of the fiscal gap between Japan and other countries will also be taxed by the Japanese government.

"Businesses do not like uncertainty," says Serwicka. "And Brexit is a question of uncertainty."

However, it is not because Britain loses, that the rest of Europe can look without worry. Rudlin has spent years advising Japanese companies and is concerned that in the automobile industry at least, the pendulum is not turning away from Britain, but from Europe as a whole. For signs of the future, call another manufacturer. "If Toyota says they're going there, it's for me to worry," she said.

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