Midlands automotive industry badly affected by any Japanese withdrawal

THE threat by Japan to withdraw some of its companies from the UK post-Brexit could have serious implications for the automotive sector, a Midlands academic has warned.

Professor Nigel Driffield, of Warwick Business School, said Japanese companies were responsible for millions of pounds being invested into the Midlands’ automotive industry – not even taking into account its massive Toyota plant at Burnaston, near Derby.

Prof Driffield, a professor of International Business, has researched the effects of Brexit on foreign direct investment into the UK.

He said: “It is unlikely that even if the post-Brexit world were not to the liking of Japanese investors they would move overnight. However, one should bear in mind that Japanese car firms invested some £260m in the four years up to 2014 in the UK.

“Virtually all of this took the form of re-tooling or updating rather than new greenfield investment, and it is that which over time would drift away were the UK to divorce itself from the single market.

“At the same time, it is important to recognise that well-known Japanese firms in the UK are in locations with high unemployment, where the firms themselves are at the centre of wider networks and supply chains.”

He said that were these firms to relocate, or prioritise production facilities elsewhere, then the number of jobs under threat would greatly exceed the number employed in just the inward investors themselves.

“Japanese investment in the UK has been significant since the 1980s, and while Japan only represents about 3% of the total FDI that comes into the UK, it is much higher in certain high profile sectors, such as automotive, and in sectors with very close trading links to the EU,” added prof Driffield.

“This is not merely in terms of the EU as the final export market for Japanese cars made in the UK, but many supply chains in these sectors cross several EU national borders, meaning that free movement of components as well as finished goods is key to continued development for this sector.”

He said that for Japanese firms to continue investing in the UK trading arrangements needed to be as smooth as possible.