Why Specter of a No Deal Brexit Is Spooking Asian Companies
(Bloomberg) -- With only six months left before the U.K. pulls out of the European Union, the chance of a chaotic exit is spooking Asian companies invested in Britain as they face higher tariffs and costs.
The virtual stalemate in the negotiations since March has left many firms on edge. The talks have stalled on the question of how to avoid police and customs checks on the border between the U.K. and Ireland.
“If there’s a no deal Brexit, there will be very serious impact on Japanese corporations and we’d like them to avoid that situation,” said Hiroaki Nakanishi, chairman of the country’s largest business lobby, Keidanren. “It’s natural to assume that Japanese companies may start leaving the U.K.”
Here’s what companies say on Brexit:
The world’s most-profitable carmaker would need to temporarily halt its production in the U.K. if Britain crashes out of the EU without a trade agreement, disrupting the weekly revenue of 60 million pounds ($78 millon) generated there, the company’s Europe President Johan van Zyl said this week. The Japanese firm wants tariff-free trading after Brexit, he said.
Of the 144,000 vehicles -- Auris hatchbacks and wagons -- Toyota built last year in the U.K. at its factory in Burnaston, England, about 87 percent was shipped to the EU. It also has another plant for engines at Deeside, Wales. Both were established in 1989 and started production in 1992. They have made more than 4 million cars and 5 million engines. The company has invested about 2.5 billion pounds in the facilities employing about 3,000 people.
Sony Corp., grappling with questions over its employees and distribution and sales channels, said it is closely monitoring the negotiations and will take measures once policy decisions become clearer. Its European head office is located southwest of London in the town of Weybridge. The Japanese technology giant has research and development centers and manufacturing hubs throughout the rest of the country.
Panasonic Corp. said it shifted its Europe head office from near London to Amsterdam on Oct. 1, and transferred about 10 people from the facility as well. The move was made partly to ward off potential negative effects of Brexit and also because the electronic maker’s holding company was already based in the Dutch city, it said in August. The company, which produces televisions, digital cameras and tablets in the U.K., won’t move its factory, a spokeswoman said.
Japan Tobacco Inc. said it’s assuming a “negative impact” on exports and imports. “We’re always looking at how to improve efficiency in our global supply chain by taking into consideration cost, taxes and other regulations,” a spokeswoman said. The company sells Camel and Winston cigarettes in the U.K. and had about 41 percent share of the country’s tobacco market as of June. The sticks sold in the U.K. are made and imported from the EU region, according to the company.
Asahi Group Holdings Ltd., Japan’s largest brewer, owns and sells European beer brands Peroni and Grolsch in the U.K., which it picked up from Anheuser-Busch InBev NV in a deal worth $2.9 billion in 2016. In the event of a hard Brexit, its Peroni brand would likely be impacted due to its large presence in the British market -- the beer is brewed in Italy and exported to the U.K. Asahi’s flagship Super Dry is also made in Italy and exported to the U.K., but it still has only a fledgling presence in the beer market there. A spokesman for Asahi declined to comment on Brexit before any official decision has been made.
Hitachi Construction Machinery Co., which makes equipment like excavators, said if high tariff rates are imposed on after-sales service parts sourced from its Dutch manufacturing base, it would consider shipping them from Japan instead. The company isn’t planning to cut its operations in the U.K., where it owns a sales unit, a spokesman said.
Jaguar Land Rover
Chief Executive Officer Ralf Speth said last month that a no-deal Brexit would wipe out the luxury carmaker’s profit and a bad one could cost the automaker more than $1.2 billion pounds a year and put tens of thousands of jobs at risk. Free access to Europe’s single market is “as important a part to our business as wheels are to our cars,” he said. The company, owned by India’s Tata Motors Ltd., employs more than 40,000 in the U.K. and has four plants in the country that produce 3,000 vehicles a day. Speth has already cut about 1,000 jobs this year in response to a slump in sales of diesel cars and the uncertainty around Brexit.
Nomura Holdings Inc., Japan’s biggest securities firm whose 3,000 European employees are mainly in London, is planning to shift more than 100 to Frankfurt, Bloomberg reported in March. It appointed a Brexit czar to oversee preparations in anticipation of tough decisions and a tight timetable, a person with knowledge of the matter said then. The company picked the German city last year as the headquarters for its EU operations after the U.K. leaves.
Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, last year chose Amsterdam as its EU base after Brexit. MUFG, which has about 2,000 staff in London, has said the move will allow it to serve clients in the bloc even if its U.K. business loses so-called passporting rights to operate across borders.
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