Japanese Investment into the UK-how to keep it here.
Rishi Sunak recently announced that Japanese firms have committed to invest £17.7 billion into the UK. Japanese investment in the UK, especially within the renewable energy sector is a good thing, not least for job creation and productivity, especially since based on statistics from the Office for National Statistics, FDI received from Japan is, on average twice as productive as FDI from the US. It is also so important for a wider engagement with and understanding of Japan across the UK and vice versa.
However, what recent news reports of increased economic co-operation with Japan do not mention are cases such as Japanese investment from Sumitomo and Osaka Gas, who bought SES Water, and have recently pulled out because of a) the high level of debts they incurred due to the poor infrastructure and b) the reputational risks and high costs involved due to the sewage dumping scandal in the UK. To keep Japanese investments coming and more importantly staying in the UK, the Government needs to make sure our infrastructure is better and also be aware of the Japanese attitudes towards reputational damage (and hopefully stop sewage companies from dumping sewage in the first place!). They would also do well to look at the labour market environment they are creating. With so many parts of the workforce on strike and a record high number of workers on long-term sick leave, this does not really appeal to more inward investment in areas that rely on a motivated workforce and long term knowledge exchange. For the Japanese part, it seems that they might benefit from more due diligence on the evolving nature of the macroeconomic, societal and political environment in the UK and the issues faced within industries from the factory floor up to policy level.**
That said, I do hope this recent deal goes some way towards re-establishing the loss of trust and stability that came from the uncertainty of Brexit, which caused a significant reduction in Japanese FDI into the UK across a number of manufacturing industries, including electrical equipment, machinery, and transportation equipment, financial services and wholesale/retail affiliates*. The Japanese may be risk averse, long-term and operate on trust, but I am glad they have seen areas where there is some stability and long-term potential within the UK.
*Andrzej Cieślik , Michael Ryan, Brexit and Japanese foreign direct investment in the UK: a sectoral analysis, Oxford Economic Papers, Volume 74, Issue 4, October 2022, Pages 959–975.
**** Please contact us if you are a Japanese company/executive wishing to get a realistic overview based on the reality of what is happening in the UK so you can really understand issues that may impact on your business reputation and development but also so you can understand the labour market issues that are fundamental to your company’s success in the UK. This objective overview will be based on a unique blend of sociological and political research and real-life business case studies covering topics such as:
What is the real relationship between business, government and society?
Why did the Government push Brexit through and why did people vote for it?
Why are so many workers on strike? What does this mean for how I should behave as an employer?
What is the current situation in the UK regarding sensitive issues such as trans rights and gender equality?
What are the important social issues within UK society and how are issues such as environmentalism and the cost of living impacting upon public opinion towards businesses?
Why is UK society so divided? What are the ‘culture wars’?
We also link in with current affairs to ensure you can understand how the British think and behave. For example, we explain how some of the British hidden ‘rules of play’ have come out in the Royal Scandal with Harry and Meghan and the recent political ‘Party Gate scandal’ and we also look at how the British attitude to risk and decision making impacted upon the Brexit vote.
Likewise, contact us if you are a Western company wanting to attract/retain Japanese investment. We have over 20 years of experience on advising Anglo/European companies on their business with Japan.