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This account of a relationship that strengthened year after year – in a period during which the UK was in the EU – raises a very obvious question. Will it continue to thrive after we have left? He replies decisively. “One thing I can say for certain, based on fact, is that the companies operating today in the UK are not expanding their investment in the UK today.”
Huge Japanese firms with big plants in the UK – such as Nissan and Toyota, who sell most of their British-made cars into the EU – are, he says, treading water, biding their time before deciding whether to relocate part or all of their businesses, so they can continue to be based inside the single market after March 2019. He tries not to sound alarming, but is clear about the threat to UK jobs. “They are currently considering and thinking and watching very closely what they need to do. That is why they are not investing additionally today.
“If you are proposing in your board meeting in a company that you need to invest more and build more cars in the UK today today there will be questions, and those are questions that are very difficult to answer today with certainty and therefore decisions are put off.”
For Japanese enterprises which came to the UK to sell into EU markets, tariff-free trade is the guiding star that decides where they locate.
“The reason that many of those companies have come is that this is the best gateway to Europe,” he says. “If that is in danger, if that is no longer sustainable, of course they will have to look at what they will have to do best. The existing arrangement for the single market is a total frictionless trade.”
He believes membership of the single market is as good as it gets for Japanese firms wanting to sell into the EU from European bases. “The EU is a very exceptional single market. I don’t think the single market could be substituted by something and be better or even be the same.” [...]
Factory-based businesses, however – those producing goods for European markets rather than merely designing them – are a very “different issue”. They face real uncertainties if and when the terms of trade change. So too do Japanese financial institutions in the City, Japanese banks and other organisations offering financial services.
The fact they will no longer have passporting rights to operate into EU markets will have significant effects on employment here. “It is an issue – because having passporting rights to reach the single market and be part of the single market is a very efficient and cost-saving way of conducting financial services which is a regulated industry.” Will Japanese banks up sticks and go? No, he says, not lock, stock and barrel, because Europe is just part of their market. But jobs will head out of the City into the EU and Japanese companies will have to reduce their operations in London. “They are not leaving London, because London is a global financial centre, not just a centre for the EU – but they will have to relocate some of their EU business to the EU in order to continue serving the EU consumers.”
He is at pains not to talk down the UK’s post-Brexit prospects. Just as no one thought Brexit would happen when he arrived, no one can know for definite that it will turn out badly, as it approaches.
“If you take a longer term, five, 10, 20 years… things become more unpredictable,” he says. But he is clear that in the shorter term it will not be good for the UK economy nor the strength of its economic partnership with Japan.
He says Japan has not yet begun talks with the UK on a post-Brexit trade deal and that it would take several years to complete, if one is struck at all. It is another area of real uncertainty in the entirely unpredictable post-Brexit world that he never expected to encounter on arriving in London.
Full interview on The Observer