Two major Japanese firms, Panasonic and Muji, plan to ditch the United Kingdom and move their headquarters to other countries – all because of Brexit. The upcoming withdrawal of the UK from the European Union decided in a referendum on 23 June, 2016 is about to take place next March, a year after the UK government invoked Article 50 of the Treaty on the European Union.
There is absolutely no clarity over what kind of circumstances the UK ends up in when the scheduled exit from the European Union will be finalized and what kind of a relationship the country will have with the EU. that is precisely what drove Panasonic and Muji to leave the islands and move their HQs elsewhere.
Panasonic Is Shifting From the UK to the Netherlands
The Japanese multinational electronics corporation plans to move its European headquarters to Amsterdam, Netherlands.
The £55 billion ($71 billion) Japanese electronics giant announced the plans for the relocation about ten days ago. However, Panasonic added that the company has been considering it for more than a year.
Laurent Abadie, the CEO of Panasonic Europe, told in an interview with Nikkei that “the company has been considering the relocation for 15 months, given various business implications from Brexit.”
The move of the headquarters is happening “to avoid potential tax issues” due to Brexit. Back in 2016, UK said that it would gradually lower its 20% corporate tax rate (the corporate tax rate is now 19% and it will even be lowered to 17% in 2020) in order to retain multinational corporations with headquarters in the UK.
For the Japanese government the UK will become a tax haven. However, that also means that the Japanese companies operating in the UK will face back taxes from their central government. Under the Japanese laws, if a subsidiary is paying a corporate tax of less than 20% rate, it is subject to taxes in Japan. Such conditions might discourage Japanese companies from running their businesses in the UK.
Abadie added that “moving the regional headquarters to continental Europe will also help Panasonic avoid any barriers to the flow of people and goods.”
Panasonic’s UK office, located in Bracknell, about 30 miles from the UK’s capital, has roughly 30 employees, 10 to 20 of whom will be relocated to the Dutch capital. Those who have to move will deal with auditing and financial operations, while those who stay will be the investor relations staff.
The move will take place in October.
Panasonic and Muji are not the only Japanese companies that plan to move their HQs out of the UK.
Where Will Muji Go?
Less than a week after the Japanese electronics giant confirmed that it will relocate its UK office to the Netherlands, Muji hinted at the possibility of following Panasonic, albeit not to the same country.
The Japanese retail company announced that it is considering to pull its HQ from the UK. Expectedly, as a result of Brexit and the possible tax changes induced by it. Such changes could have a very negative impact on the company’s profitability. According to a report from Bloomberg, the company is thinking about moving its HQ to Germany.
A spokeswoman for Muji told in an email report: “As a company we’re reviewing the risks from Brexit and always considering all available options.” She added: “We have not made a decision on moving our office since no new location has been decided on.”
Since the plans for switching from the UK to Germany are not yet official in terms of the new European base, the source that said that the company is thinking about Germany did not want to be identified.
Muji operates 12 stores in the UK, and its headquarters are located in London. There are roughly 50 employees in the company’s London HQ and it is not yet clear how many of them would move to the new location if Muji decides to go through with the plans to leave Britain.
More Japanese Businesses Are Sounding the Alarm on the Post-Brexit Fears
More and more Japanese businesses are concerned about the Brexit and the tax changes that could hurt their companies operating in the UK. They are all considering pulling out from Britain to make sure that their organizations don’t face negative consequences in terms of back taxes from their central government.
Hiroaki Nakanishi, the chairman of Keidanren, the Japanese Business Federation, had an interview with the Financial Times, where he said: “We just can’t do anything. Everyone is seriously concerned”. He said that all Japanese businesses operating in the UK are frustrated by the lack of clarity regarding Brexit, highlighting that they have all been waiting more than two years for any sort of resolution.
He added: “Various scenarios get discussed, from no Brexit to plunging into Brexit without any kind of deal at all. We’re now in a situation where we have to consider what to do in all of them.”
Mr. Nahanishi also addressed the double talk from the British government over Brexit, which makes Japanese businesses even more concerned, not having the slightest idea of how to respond. He said: “When you talk to the UK government, they say something a bit different depending on who is speaking.”
He also added that the British government has not yet acted on requests by the Japanese government back in September 2016 made in a 15-page memo.
Japan’s biggest business lobbyist also added that a no-deal Brexit would be “disastrous” and strongly urged the UK to remain in the customs union, saying: “Please, keep the current economic environment as much as possible, including the customs union. If you don’t, then it will clearly hinder economic activity in the UK”.
Keidanren represents more than a thousand of Japan’s largest corporations, including huge investors in Britain such as Nissan, Toyota, and Honda.
Panasonic and Muji are not the only Japanese companies that plan to move their HQs out of the UK. Several major Japanese financial institutions, including Daiwa Securities, Nomura, and Sumitomo Mitsui, have already made the same plans. Given all the circumstances, more businesses could definitely follow very soon.