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Sunday, September 04, 2016

Brexit bites

There were a lot of promises made by the Leave campaign during the referendum and a great many rebuttals of the case being put to stay in the EU, not least Leave said that the claims Brexit would result in a mass exodus of jobs away from Britain were nonsense.

Inevitably, as with their promise of £350m a week extra for the NHS, Leave EU have been found out as fantasists of the highest order.

Of course we have not left yet, nor have we started the formal process that will leave to our leaving but the portents are not good, particularly in the statements coming from other governments recently. The Independent for example reports today on President Obama's comments at the G20 summit in which he stands by his comment before the vote that the UK is now at the "back of the queue"  for trade talks. So much for the confidence of the likes of Boris Johnson that we can easily forge a new path in world trade.

Equally as worrying is this piece on Sky News that the Japanese government has taken the unprecedented step of warning of a series of corporate exits, "great turmoil" and harmful effects if Brexit leads to the loss of single market privileges.

Surely the Brexiteers said that would not happen.

The Japanese government has produced a 15-page list titled "Japan's message to the UK and the EU", which detail the requirements from Brexit negotiations and lists the consequences if the requirements are not delivered. As Sky points out half of Japanese investment in the EU comes to the UK including companies such as Nissan, Honda, Mitsubishi, Nomura and Daiwa. It is worth quoting extensively from the article:

"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 concludes.

It says: "In light of the fact that a number of Japanese businesses, invited by the Government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, 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."

The list is the most tangible account anywhere of what businesses are asking for from the Brexit negotiations.

It suggests Japanese car companies fear that they will be hit by a double whammy of trade tariffs.

There were fears of levies being imposed twice "once for auto parts imported from the EU and again for final products assembled in the UK to be exported to the EU - which would have a significant impact on their businesses.".

The report also states that the UK leaving the EU would damage exports from Britain to third countries because of trade privileges within the EU single market around so-called "rules of origin".

"Brexit would make such products unable to meet the rules of origin as EU products, which means that Japanese companies operating in the EU would not be able to enjoy the benefit of the Free Trade Areas concluded by the EU," the report said.

It also calls on the UK to "maintain access to workers who are nationals of the UK or the EU", saying the European labour market could suffer "great turmoil" if EU nationals could not freely travel between and stay in the UK and continental Europe.

The Japanese government warns its banks will move their European HQs out of London if the Brexit negotiations fail to secure the financial services passport to operate in the EU.

"If Japanese financial institutions are unable to maintain the single passport obtained in the UK, they would face difficulties in their business operations in the EU and might have to acquire corporate status within the EU anew and obtain the passport again, or to relocate their operations from the UK to existing establishments in the EU," said the report.

This concern has already been noted by the Bank of England, but this is the strongest indication yet of other nations spelling out the implications of some types of Brexit.

Those impacts also will be felt in the pharmaceutical industry, says the report, which sees the location of the EU's European Medicines Agency in London as crucial to the UK's high tech research appeal.

"Many Japanese pharmaceutical companies are operating in London, due to the EMA's location in London.

"If the EMA were to transfer to other EU Member States, the appeal of London as an environment for the development of pharmaceuticals would be lost, which could possibly lead to a shift in the flow of R&D funds and personnel to Continental Europe.

"This could force Japanese companies to reconsider their business activities," says the report.

The warning in this document is stark. If we don't get it right in negotiations with the EU then we will lose a substantial number of jobs and a significant amount of investment. And that does not just include remaining within the free trade area but also sustaining the free movement of labour we currently enjoy.
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