Shadow of Brexit hangs over UK-Japan economic relations

The relationship between Japan and the United Kingdom has historically been a good one barring World War II.

However, that relationship has been stressed in recent years.

The UK shifted its focus for trade from China to Japan soon after the 2016 Brexit referendum. This is because UK has traditionally been a favored destination of Japanese investors for Europe but there is a rising sense of uncertainty among those investors because of Brexit.

Leaving the EU would make the UK a “less attractive destination for Japanese investment”, Japanese prime minister Shinzo Abe had said in 2016 while visiting the UK.

For eth UK, Japanese investment account for the second largest foreign direct investment sin the country and there are over 1,300 Japanese companies functional in the UK. Japan’s FDI in UK in 2015 was to the tune of £40.5 billion compared to China’s investment of £1.8 billion.

But there has been a stagnation in Japanese investment in the UK because of Brexit because of deep and serious concerns of the possible negative effect of Brexit, said a 2017 survey by the Japan External Trade Organization (JETRO). The concerns are more prevalent among Japanese automotive, pharmaceutical and financial businesses

Half of the 1.67 million cars manufactured in the UK annually is accounted for by Japanese car makers Honda, Nissan and Toyota. A large part of this is exported to other European countries and hence the possibility of the UK loosing membership of the single customs market is a huge concern for these companies.

The issues related to restrictive tariffs, divergent rules and the relocation of the European Medicines Agency (EMA) from London to Amsterdam are among the major concerns for the Japanese pharmaceutical industry.

London has bene the financial hub for Japanese companies but uncertainties following Brexit about passporting rights for London-based firms to provide financial services across the EU has turned out to be another of the concerns Japan’s financial industry operational in the UK. A number of Japanese financial institutions have therefore relocated to other cities in Europe.

While there are some Japanese companies – primarily IT and technology related ones, who have decided to stay back and continue to invest in the UK, one the over al, there are rising concerns in the UK about loosing out on Japanese investments.

A Japan-UK Free Trade Agreement (FTA) after Brexit was announced by UK Prime Minister Thresa May to sooth some of the concerns of the Japanese business community. Such an agreement would help retain Japanese companies and investments in the UK, according to May.

(Adapted from Asiatimes.com)

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Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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