domingo, 4 de setembro de 2016

Japan calls for ‘soft’ Brexit — or companies could leave UK

Japan calls for ‘soft’ Brexit — or companies could leave UK

Memo urges Theresa May and EU to strike deal safeguarding UK’s current rights in single market

by: George Parker in Hangzhou

Japan has issued a daunting challenge to Theresa May, UK prime minister, to negotiate a very “soft” British exit from the EU or risk seeing Japanese banks and other companies leave for the continent.

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Mrs May, attending her first G20 summit in China, was also warned on Sunday by Barack Obama, US president, that strong business links between his country and the UK could “unravel” unless Brexit was handled carefully.

The British prime minister had been left in no doubt that Japanese and US companies invested in the UK partly as a base to reach the 500m consumers of the European single market, and that continued access was seen as vital.

A memo on Japan’s Brexit demands, posted on the ministry of foreign affairs website, called on Mrs May and the EU to negotiate a post-Brexit deal that safeguarded almost all of Britain’s rights in the single market.

The memo said the UK government lured some Japanese companies to Britain on the basis that it was “seen to be a gateway to Europe” and suggested it had a moral obligation to honour those promises.

“We strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses,” said the memo, setting out Japan’s position to both British and EU negotiators.

“Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe if EU laws cease to be applicable in the UK after its withdrawal,” the report says.

It adds that Japanese financial institutions might have to “relocate their operations from the UK to existing establishments in the EU” if they were to lose their right to the single passport obtained in Britain to access the single market.

Almost half of Japanese direct investment intended for the EU in 2015 flowed to the UK, and Britain was one of the main destinations for Japan’s investment stock within the EU as of the end of last year.

Toyota has two plants and employs 3,500 in the UK. While not referring directly to the government memo, the company said on Sunday: “Going forward, we will closely monitor and analyse the impact on our business operations in the UK and how we can maintain competitiveness and secure sustainable growth together with the UK automotive industry and other stakeholders.”

Sources in the Japanese banking sector say they saw the memo on Japan’s Brexit demands as making common sense.

Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe
Memo posted on Japan’s ministry of foreign affairs website

“It’s helpful in some ways because it puts responsibility on the EU and UK [to sort this out],” one of the sources said.

The sources were cautious on the document’s implications that there would be big changes to Japanese banks’ European headquarters if there was a “hard Brexit”, stressing that there were other ways around licensing issues beyond moving their headquarters.

As well as its UK operations, which employ about 2,000, Nomura has an extensive presence elsewhere in the EU, including banks in Luxembourg and Frankfurt. Japan’s other two big banks with London operations — Mizuho and Mitsubishi UFJ, which employs 1,200 in the UK — also have other EU operations including licensed banks in Luxembourg.

But Japan’s business wish list could be very difficult for Mrs May to deliver, since it closely resembles Britain’s current relationship with the EU, something that UK voters and many Tory MPs want to fundamentally reform.

Japanese companies want to retain access to workers who are nationals of the UK and EU and to maintain current tariff rates and customs clearance procedures. They also want to maintain harmonised regulations and standards between Britain and the EU.

Mrs May had accepted the need to “control” the free movement of EU nationals to Britain, something that ministers conceded was incompatible with membership of the single market.

Mr Obama, who met Mrs May at the G20 in the eastern Chinese city of Hangzhou, said Britain’s exit should be negotiated so that there was minimised disruption of American investment in the UK and it did not “unravel” strong business ties between the two countries.

Additional reporting by Laura Noonan and James Wilson

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