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Japanese companies with bases in Britain are becoming increasingly anxious over the referendum this week in which the country will vote on whether to leave or remain in the European Union. Their main concerns are over possible increases in costs caused by tariffs and appreciation of the yen against the euro. If British voters choose a so-called Brexit, some company executives are saying they could be forced to review their production and sales strategies.
According to the Foreign Ministry, about 1,000 Japanese companies have bases in Britain. Many of the manufacturers among them are worried about tariffs.
Graphics: The Yomiuri Shimbun
Currently, exports from Britain to the rest of the EU are not subject to tariffs. If Britain leaves the union and the EU imposes duties on British-made goods, it would increase the price of these companies’ products, making them less competitive with manufacturers based in other EU countries.
The effect on automakers, which manufacture large numbers of vehicles in Britain, could be particularly severe. Toyota Motor Corp.’s Burnaston factory in central Britain produces about 190,000 vehicles per year, including the compact Auris. Of this total, 75 percent are shipped to other EU countries.
Nissan Motor Co. produces sport-utility vehicles and other automobiles at a factory in Britain, of which 80 percent are sold throughout the EU, in addition to other countries. Nissan President Carlos Ghosn has expressed hope Britain will remain in the EU, saying it would be better for the company from the standpoints of employment, trade and cost.
Japan Tobacco Inc., as part of a review of its production bases, is considering closing a tobacco factory in Northern Ireland by the end of 2017, and importing products made at factories in other EU countries for sale in Britain. If a Brexit occurred and tariffs were placed on imports from the EU, the company could have to reconsider where it imports products from.
Hitachi, Ltd. has received orders for 1,500 train carriages at a production base in Britain for its key railway business, and is seeking orders from all over the EU. “Maintaining a strongly unified EU and open market that includes Britain is good for the prosperity of Europe and for Hitachi’s business,” a company spokesperson said.
Britain leaving the union could accelerate the appreciation of the yen against the euro, increasing the prices of products exported from Japan to the EU. Adding tariffs to this would make sales in the EU even more challenging. Also, the free movement of people between Britain and the rest of the EU may stop, making it more difficult for companies with bases in Britain to find workers.
“Overseas investment in Britain could fall, which could impoverish the economy. Even if companies with factories in Britain want to move, the huge cost this entails makes it a difficult choice,” Yasuhide Yajima of NLI Research Institute said.
(THE YOMIURI SHIMBUN)
