The Japanese company Panasonic has announced that it will move its European headquarters from Britain to the Netherlands later this year. The reason: Japan could treat the UK as a tax haven after Brexit if London decides to lower its corporation tax rates to attract businesses – meaning that Panasonic could face back taxes levied by Japan. Much foreign business and financial sectors have been concerned about the consequences of Brexit. They have subsequently decided to move from the UK to Continental Europe. Therefore, the UK faces a “race to the bottom”: Britain needs to find ways to keep itself attractive to foreign investors and companies while it competes against the European Union which has been offering foreign companies and financial institutes incentives to relocate.
The UK, and particularly London, has served as the economic and financial headquarters for many foreign companies in Europe. However, amid Brexit, it remains unclear if the UK would remain the EU’s single market and maintain its “passporting rights” – referring to the provision of financial services to London-based firms across Europe. Hence, uncertainty amongst financial investors.
Panasonic and several other Japanese firms such as Mitsubishi, Sumitomo Mitsu Financial Group Inc, and Nomura Holdings Inc. have announced that they would move their European headquarters to continental Europe. Especially Japanese car manufacturers such as Honda, Nissan, and Toyota, which produce almost half of the 1.67 million vehicles manufactured in the UK, have shown concerns about the reintroduction of border controls, restrictive rules, and tariffs non-tariff barriers. Interestingly, the city of Sunderland, where Nissan employs 6,700 workers who supported another 35,000 local jobs, voted by a large margin to leave.
Foreign direct investment in the UK is also going to stagnate. For instance, according to the Japan Times, Japanese companies have invested more than £45 billion in the country – emphasising UK’s interest in maintaining Japanese investment. Though, in 2016, the Japanese Prime Minister (PM) Shinzo Abe warned the UK that leaving the EU would make Britain a “…less attractive destination for Japanese investment”. It is therefore unsurprising that the UK has shifted its economic focus from China to Japan.
Due to the global concerns, Prime Minister Theresa May has also begun several Free Trade Agreement (FTA) plans with countries such as Japan or Australia. An FTA would most likely sustain businesses in the UK, invite investment, and “…appeal to British citizens as a benefit of Brexit”. Yet, despite the “Global Britain” rhetoric, amid the chaotic state of Brexit politics in the Conservative Party, as long as the UK remains in the EU, the UK cannot legally negotiate an FTA.
What we will see in the future is that more and more businesses but also, international organisations are going to move out of Britain because it became particularly for European entities, no longer acceptable to stay in the UK. Bound to move are the European Medicines Agency which relocates to Amsterdam while the European Naval Force Somalia (or Operation Atlanta) has decided to settle in Rota (Spain) and Brest (France).