Commentary / Japan

Brexit hasn't triggered a general Japanese retreat from Britain

by David Howell

All good things come to an end — or so they so say.

Some sensation-seeking British journalists have just found an undoubtedly good thing that they claim is at an end. This is the massive and long-standing industrial relationship between Japan and Britain, especially in automotive manufacturing.

The news that Honda is closing its plant at Swindon, after 40 years, and that Nissan is to make its new X-Trail model back in Japan rather than at its super-efficient plant in Sunderland, England, has been greeted in anti-Brexit quarters as a clear sign that after all these years Japanese investment has lost faith in Brexit-minded Britain and is heading home.

The news that in other sectors both Panasonic and Sony are shifting their headquarters out of England and to somewhere on the European continent has given further fuel to this story. Nor has it helped that Hitachi has just suspended involvement in one major British nuclear power project and Toshiba has withdrawn from another, although even the most frenzied opponent of leaving the European Union would find it hard to attribute this to Brexit.

One part of the whole picture which is unquestionably true is that Japan’s investment in the United Kingdom has not only been a major commercial success but also a huge benefit for the transformation of the British economy over some 50 years. Incoming Japanese businesses in the 20th century faced Britain’s obstructive trade union practices head on. Ludicrously restrictive work practices, limiting all innovation, were thrown out and poorly trained and embittered workforces rejuvenated with high tech production and top-class working conditions — for instance with brand new plants in the Welsh mining valleys.

So even if it was true that the Japanese were now departing, when in fact it is all a gross exaggeration, this would be the occasion for an enormous thank you. The Japan investment factor, beginning with Sony’s new plant at Bridgend in the early 1970s, played a major part in taking British industry out of its strike-ridden, postwar state into the modern era and preparing it for the waves of new technology revolutions to come. It would be like saying thank you and goodbye to a first-class consultant or doctor who had effected a complete cure and could go on their way with the job well done and much gratitude.

But of course this is all just fantasy. There is no general Japanese retreat from Britain. The departures are only a tiny fraction of the dozens of Japanese companies and the at least 150,000 jobs that they provide.

What may be going on is something entirely different — especially within the automotive sector — something that the average political and economic commentator finds it difficult to grasp. The entire world automotive industry is undergoing a radical refashioning.

Analysts forget, as they rush to print, that traditionally Britain has been extremely good at designing and producing motor vehicles. In the earlier part of the 20th century it led the world. It is true that British car manufacturing was ruined by militant trade unions, bad planning and weak management in the 1950s and had to be rescued by investors, Japanese, French and German. But there is no law of nature that decrees against a revival of British ownership in the totally changed conditions of a new era of industrial technology and a new age of automotive design generally.

The opportunities for British-led entrepreneurs to move back in and build a different kind of auto industry, are growing all the time. A revived British-based motor industry would still need to work hand in hand with Japan’s recognized world lead in automation and robotization, and probably with car production in other countries as well.

This is because the assembly of cars, including their engines and electronic component parts, is now a completely internationalized network business. There are skills and partnerships to be drawn on from a whole variety of countries, not just Japan, but also South Korea, Malaysia, Vietnam, Thailand, South Africa, Turkey, Brazil and, of course, China.

Thanks to Japan’s reforming impact the British car scene is now ripe for moving into this new and different age, both in terms of entirely new enterprises, new products (for instance to meet the electric and hydrogen propulsion future) and new patterns of personal car use in an urbanized world. Millions living in cities are now asking why bother to own a car when you can always rent one on demand from a nearby stand, use a car-sharing service, or request a vehicle and driver online within a minute.

International standards are, of course, always required in car design and safety features. But these are increasingly settled globally and apply to vehicles destined for every market and running on every country’s roads.

Britain plans to have a free trade agreement with the rest of the EU, just as Japan now has, so no border tariff will apply. As the next wave of globalization beds in, and the actual processes and different stages of production and marketing of a unit such as a car are themselves internationalized, it will matter less and less where the stages occur or who owns the operation at various points, or what new or long dormant name brand or marque is on the product. Large new companies could appear rapidly on the world stage from nowhere, as has already occurred in China.

In this transformed world milieu no industry is escaping disruption. Some new investments may come, some old ones may go. Brexit is just one part of a gigantic readjustment, which the whole of Europe industry is also experiencing and which reverberates in all corners of European politics. Life was always difficult for the international corporate investor in choosing into which country to locate big resources and different parts of the supply chain. It is about to get even more so.

David Howell is a Conservative politician, journalist and economic consultant. He is chairman of the House of Lords International Relations Committee.

GET THE BEST OF THE JAPAN TIMES
IN FIVE EASY PIECES WITH TAKE 5