Boris Johnson Re-election Sparks Hard Brexit Fears for Japanese Companies

Recent polls in Britain reveal that Boris Johnson’s Conservative Party is favourite to win in the upcoming UK general election, causing concern for Japanese firms in Britain

The uncertainty of Brexit

A Conservative Party win on December 12 will undoubtedly lead to Britain officially exiting the European Union at the end of January 2020, followed by negotiations for a free trade agreement.

The hard Brexit proposed by Boris Johnson will sees ties with the EU significantly cut causing friction for companies connected to the United Kingdom.

Despite Johnson’s insistence that he will have a new trade deal in place by the end of 2020, trade experts are not convinced he can pull it off in such a short timeframe.  And businesses claim they will need more time to adapt to the changes.

A deal may not be as easy as Boris makes out

The experts believe the deal will take years to negotiate, and will create more conflict and costs than were predicted with former Prime Minister, Theresa May’s proposed deal. May pushed for a ‘softer’ Brexit with closer customs and regulatory cooperation with the EU.

Pernille Rudlin, a representative for Japan Intercultural Consulting, said Johnson’s re-election would lead to another “period of prolonged uncertainty which will hurt inward investment.”

There are currently around 1,000 Japanese companies operating in Britain. As a result, the Japanese government and businesses with supply chains throughout Europe have appealed for the continuance of smooth trade post-Brexit.

Experts believe a deal will take years to negotiate, and will create more conflict and costs than predicted.

What would a No-deal Brexit mean for businesses?

A no-deal Brexit would mean that the UK has to trade on World Trade Organisation terms forcing British companies, including Japanese firms based in the UK, to pay high tariffs on imports from the EU and goods sold to the remaining 27 European nations.

Leaving the UK without a deal could mean that banks and investment companies lose the ability to operate in other EU countries while being regulated in the UK. To avoid this, Norinchukin Bank announced in January that it would set up a subsidiary in Amsterdam.

Concerns have also been expressed over access to data and the hiring and movement of employees. Other businesses have moved warehousing and distribution to mainland Europe to avoid logistics and supply chain disruption.

Japanese firms taking hard Brexit threat seriously

Understandably, companies have been taking steps to prepare for the worst-case scenario. In February, Honda Motor Co. announced it would close its Swindon factory in 2021, though its executives said the decision wasn’t due to Brexit. This closure will result in the loss of up to 7,000 jobs as suppliers are likely to leave also if they can’t easily supply parts to other manufacturers in the European Union.

Tech giants, Sony and Panasonic, have revealed that they will be relocating some of their business operations to the Netherlands. A JETRO survey found that 61 per cent of Japanese companies had decided to move their regional headquarters from the UK to other European nations.

While many firms claim a continued investment and commitment to the United Kingdom, a recent survey indicates that Japanese investors now find Britain to have the most fragile business environment in the EU. Do you have concerns about the repercussions of Brexit? Share your thoughts or opinions in the comments below.

"Otsumami" - a bite size snack:

A hard Brexit is an undesirable outcome, but it’s one to which companies will have to adapt.

What do you think?

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