This is a significant move that has raised questions about the turmoil surrounding Britain's expected exit from the European Union. Britain should be aware that this is an alarm bell sounded by the business community.
Honda Motor Co. has announced that it will end production at its car factory in Swindon, southern Britain, in 2021. The automaker will stop manufacturing vehicles in Europe, where car sales have been sluggish. The company says it will export products, including electric vehicles, for the European market from Japan and other places outside Europe.
Honda President Takahiro Hachigo said at a press conference that the move was part of a reassessment of its global production system. The president stressed that the move was not related to Brexit, but the British public has deemed that Brexit somehow prompted the automaker to make the decision.
The move was made because the company cannot ignore the influence of tariffs, from the standpoint of its business strategy.
If Britain ends up leaving the EU without formalizing new agreements, a so-called no-deal Brexit, a 10 percent tariff will be imposed on passenger car exports from Britain to the EU. In contrast, tariffs on car exports from Japan to the EU will be reduced to zero in the eighth year under the Japan-EU economic partnership agreement, which has just taken effect.
British Secretary of State for Business, Energy and Industrial Strategy Greg Clark expressed his disappointment, calling Honda's decision "devastating" for Britain. This may be a serious blow to Britain's economy and employment.
Concrete framework needed
Companies other than Honda have similarly decided to reduce or close their business bases in Britain.
Nissan Motor Co. canceled the planned manufacturing of new models at a factory in Britain. Sony Corp. has also decided to shift its European headquarters for home electronics from Britain to the Netherlands by the end of March.
Financial institutions in the City, a global financial center in London, are similarly shifting their bases and property to outside Britain. It is probably unavoidable for more and more companies in a wide range of fields to flee from Britain.
The scheduled Brexit on March 29 is approaching, but the British government and Parliament have just wasted time, failing to decide on concrete measures. They bear an extremely heavy responsibility.
The draft Brexit deal agreed on between the British government and the EU was voted down in the House of Commons by a wide margin in mid-January. British Prime Minister Theresa May is seeking a way to break the deadlock, but the EU side remains steadfast that it will not amend the draft agreement.
Pro-Brexit hard-liners of the ruling Conservative Party, who emphasize "total restoration of Britain's sovereignty," have not changed their opposition to the agreement. It is a dire political situation with danger on all sides.
The important thing is to avert a no-deal Brexit, which could cause significant chaos in the economy. The first realistic measure is to postpone Brexit. But that alone will not solve the problem.
If there remains no concrete framework for Brexit, businesses cannot dispel their anxiety, and may very likely hesitate to manufacture or invest in Britain. The country should be aware of this.
(From The Yomiuri Shimbun, Feb. 21, 2019)
Read more from The Japan News at https://japannews.yomiuri.co.jp/
