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Japanese businesses move in packs. When a Japanese automotive company heads to a new country, it will be followed in short order by Japanese companies along the automotive supply chain, as well as banks, trading companies and insurance firms to support their fellow nationals.

Honda announced on February 19 that it will close its Swindon manufacturing plant by 2021, with the direct loss of 3,500 jobs and thousands more in the broader supply chain. The worry is that Honda is a bellwether. Will the companies that arrived together also leave together?


The first big Japanese firm to plant a foot in the UK still remains here today: Fujitsu, one of the biggest Japanese employers in the UK, acquired a commanding share in International Computers Limited in 1990, a year after Honda opened its manufacturing plant in Swindon. Honda had gained a foothold in the country in the previous decade, using line employees at the failing British Leyland factory in the town to assemble its Ballade supermini. “It was at the invitation of the British government to come and help,” explains Pernille Rudlin, a consultant specialising in Japanese businesses who has worked for a number of major Japanese companies.

Since then, Japanese businesses across all sectors have used Britain as a base and a launchpad into Europe. The worry is that Honda is a warning – and not the first, either – of the shift in sentiment among the Japanese business community. “When linchpins in the UK start to go, it’s worrying,” says Rudlin. Honda is the first, but many others are primed to leave or have already started shifting production and premises offshore.

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Honda could be the canary in the coal mine: those in the know worry that Japanese businesses are quietly unpicking themselves from the fabric of British society, 30 years after they first laid down significant roots in the UK. From Swindon to Sunderland, from automobiles to insurance, Japanese companies are suddenly turning cold on the UK. Why they’re doing it may seem obvious to many, but it’s not something most want to admit.

Japanese prime minister Shinzo Abe visited the UK for talks with Theresa May in April 2017 Kirsty Wigglesworth - WPA Pool/Getty Images


Every January, the Japanese Chamber of Commerce and Industry in the UK holds its new year’s party in London’s Draper’s Hall. Fuelled by sake and buoyant with optimism, it’s a chance for the nearly 400 Japanese companies represented by the organisation who do business in the UK to catch up and chat.

Under opulent oil paintings and on deep shag carpets, representatives from some of the biggest Japanese employers in the UK gather to mingle and discuss the future. “It’s positive and booming and packed, even despite the Brexit referendum result,” says Rudlin. Weeks after this year's party, and 80 miles drive due west of the guild hall, the mood at Honda’s Swindon factory is much more subdued.

The factory is a sprawling mess of buildings on a site where Spitfires were once made for Britain’s war effort, but has for nearly 30 years been a key base for Honda’s European operations. When the factory is at full tilt, two million components move from warehouses onto the factory floor where they’re put together and roll off the production line as fully-formed Honda Civics.

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Three-quarters of the individual items that get put together to make a Honda Civic travel to Swindon from mainland Europe via the Eurotunnel. Others come from a network of suppliers employing thousands around the country. Getting those parts to Swindon is likely to become much more difficult post-Brexit, which is partly why Honda announced this week it would stop producing cars at the factory.


“Production stopped straight away and most of the people ran home crying,” says one Honda worker, who has been employed by the company at the Swindon plant for less than a year. Like many Honda employees I tried to speak to, he asked not to be named. Unite, the union overseeing the negotiations between Honda and its soon-to-be-laid-off workers, also declined to put any workers forward, citing worries about the impact it could have on their future position in the company.

“It’s a hard feeling no doubt – especially for people who had worked [there] for more than 15-20 years,” the unnamed worker, who was due to be back at work on Saturday to learn more about his fate, says. “For me it’s different as I’ve been working less than one year for Honda and because in the country I lived in previously, a factory closure was something usual,” he says. “For the British people, yes, it would be hard. And Swindon life will change soon.”

Life in Swindon won’t be the only thing to change if Honda is the first sign of a wider Japanese retrenchment. With $56.2 billion (£43 billion) of foreign direct investment in the country in 2016, Japan is the seventh-largest investor in the UK, more than Ireland, Australia and India combined.

The UK imported $14.5 billion-worth (£11 billion) of goods from Japan in 2017. Gold (20 per cent of the total) accounted for most of the value of items imported, with cars (14 per cent), vehicle parts (a further 5.4 per cent) and engine parts (2.2 per cent) major contributors. Japanese car companies like Nissan, Honda and Toyota then use the UK as a springboard into the rest of Europe: 46 per cent of cars exported from the UK in 2017 ended up on the continent.

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The entanglement between the two countries began because Japanese businesses loved the UK’s access to the European single market, says Ilona Serwicka, research fellow at the UK Trade Policy Observatory based at Sussex University.

But it was more than our role as a launchpad into a market of 500 million European consumers that attracted Japanese businesses to our shores. The UK was smartly positioned on the world map, a bridge between timezones for Japan and the United States. “There was the idea of a baton touch – they hand things over to the UK who then hand things onto the US,” says Rudlin.

Japanese firms were not just in a selling market, either: they were buying in talent from across Europe. Japanese firms set up their European headquarters in the UK partly because of the strength of its services industry but also so they could hire the best workers from across Europe to improve their productivity. Sentiment also played a factor. “They’ve always felt Japan and the UK are similar,” says Rudlin. “Island nations with an imperial past, both keen on not being very direct, brutal or macho. We’re both very polite and indirect. They quite like all of that.”

That indirectness and eagerness to avoid confrontation has muddied the waters behind the great Japanese exit from the UK business sector in recent years. Ian Howells, Honda’s European boss, told the BBC that “this is not a Brexit-related issue for us”. But experts argue that’s simply Japanese politeness and an attempt not to make trouble for a foreign government. “People claim it’s just a global trend,” says Serwicka. “But it’s not. Brexit is definitely part of the Nissan and Honda story.”

An aerial view of the Honda factory in Swindon David Goddard/Getty Images

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Weeks before news of Honda’s plans broke, Nissan announced it would not be making the X-Trail SUV at its plant in Sunderland, despite receiving reassurances from the government that it would be protected post-Brexit with £61 million of state aid for keeping the work within the north east. Instead, work on that model will be repatriated to Japan, with Nissan’s 7,000 workers in Sunderland facing a similarly uncertain future. Nissan itself blamed “continued uncertainty around the UK’s future relationship with the EU” for its decision.

It’s not the only bad news to affect the north east of England of late, which voted mostly in favour of leaving the European Union. Hitachi recently moved its global rail headquarters to the UK and was prepared to build London Underground trains at a factory in Newton Aycliffe – a contract it lost to Siemens, which has since said it won’t build the trains in the UK. “That cheesed them off,” says Rudlin. Hitachi has since acquired various Italian rail companies and built up positive relationships there. While the laid-back Italian way of business and the highly regimented Japanese lifestyle may seem at odds, stranger relationships have blossomed.

Spurned lovers are also more likely to make rash decisions: Hitachi Europe was also due to work on two nuclear power plants in Wales and Gloucestershire until both projects were frozen. The Horizon nuclear power projects would have employed 9,000 workers in the building process. “There is a glimmer of hope,” says Rudlin. “They said they were freezing it and there is apparently an alternative way of financing it, but the British government at the moment is distracted with other things.”

Each new announcement has come as a hammer blow to the future of Japanese-UK business relations, but non-manufacturing Japanese firms who have built up a base in the UK are also preparing for Brexit by placing one foot in continental Europe. Japanese insurance companies and marketing agencies have been on a buying spree, snapping up UK businesses, but are also setting up alternative seats of power in Paris, Luxembourg, Amsterdam and Frankfurt to be able to trade with the rest of Europe.

As British trade negotiators have spent their time flitting between Westminster and Brussels, they’ve been overlooking farther-flung firms based closer to home – potentially insulting the Japanese, for whom personal relationships and devotion play a big part in business decisions. “The views of others hasn’t played any role in the way the Brexit debate has been handled by the government,” explains David Henig, a former UK government trade mandarin, who helped form the Department for International Trade post-Brexit referendum before leaving the government in 2017. “We’ve gone on a very UK-first track, and you pay a price if you’re not really caring what other people think about.”

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“The handing of Brexit has been upsetting to the Japanese, and as a result we have Honda and Nissan,” says Serwicka. Henig agrees: “It was always going to be a tricky situation, but I think Japanese companies and the government were continually asking for reassurance and weren’t getting it. What else are they going to do? They’re going to make their excuses and leave.” Whether Japan’s decisions are as much of an augur of broader issues to come, like Honda’s could be of Japanese businesses as a whole, is yet to be be seen.

7,000 Nissan workers in Sunderland also face an uncertain future Christopher Furlong/Getty Images

When Rudlin worked at Fujitsu, she saw a shift in the way the company worked. virtual teams and remote work meant that not everyone had to be based in the same British office to work together. Instead, employees could span an entire continent. Colleagues could be based in Bristol, Berlin and Bratislava and all be working under the auspices of a centralised team. At the same time, market forces are moving against low-skilled and manual labourers. “I think if Brexit hadn’t happened that trend [of downsizing low-skilled or manual labour] would have continued but in a different way. You’d continue to see Japanese companies putting headquarters in the UK, but the number of people that would involve would be slowly diminishing,” she says.

Honda’s European director may well have been telling the truth, at least partly, when he stood up in front of television cameras and professed Honda’s decision was not a direct consequence of Brexit. “I don’t think all that is related to diesel sales or Brexit,” says the anonymous Honda worker. “For me the Japanese just want to produce the same product with less costs. I won’t 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 looking bright. He’ll continue working for Honda until he gets a good offer – and in the few days since the announcement was made, has been fielding two or three a day via LinkedIn. “I’m lucky because of my qualifications,” he says. “Things will be bad for the non-skilled people.”

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The UK could face more days like this ahead. “Frankly it could be anybody,” says Henig when asked which country’s business representatives could be next to roll back their expansion plans in the UK. He points to the fact that a pre-existing free trade deal with South Korea won’t be rolled over in the event of a no deal Brexit as the next potential crisis. “There are large numbers of countries who are thinking we haven’t really bothered caring too much about them, so you really could see more countries saying the same.”

The issue isn’t with individual trade negotiators, but rather a political malaise that has affected the whole country – and is now harming its standing around the world. “These things are happening at a political level – or rather, these things aren’t happening at a political level,” says Henig. Distracted by the enormity of Brexit, things like keeping foreign investors sweet and reassuring them that the impacts of any kind of departure on March 29 won’t damage their bottom line have been overlooked.

Mooted plans to become the Singapore of the west by instigating a low-tax economy post-Brexit are also short-sighted, particularly when considering Japanese businesses, says Rudlin. “They’ve shot themselves in the foot. A low corporate tax rate is not a good thing for Japanese companies.” For one thing, Japanese rectitude prevents them from being considered tax avoiders. But the Japanese government has also recently introduced a new law saying that firms who have a subsidiary based outside Japan that makes big profits on commissions as a result of the corporate tax gap between Japan and elsewhere will also be taxed by the Japanese government.

“Businesses don’t like uncertainty,” says Serwicka. “And Brexit is all about uncertainty.”

However, just because Britain is losing out, it doesn’t mean that the rest of Europe can look on without worry. Rudlin has spent years advising Japanese businesses, and she worries that in the automotive sector at least, the pendulum isn’t just swinging away from Britain, but from Europe as a whole. For signs of the future, look to another carmaker. “If Toyota say they’re going, that’s when I’ll get worried,” she says.

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