Japanese fears over Brexit

Vaughan Jones gives his take on the Japanese response to Brexit

The Japanese government has produced a comprehensive 15-page document outlining its priorities for upcoming negotiations surrounding the UK’s decision to leave the EU; it is a compilation of the specific concerns expressed by Japanese companies in the UK. Japan is an important investor and partner on the world stage. Japanese companies located here have created 440,000 jobs and been crucial to successive governments’ economic strategies especially in areas where industrial regeneration is desperately needed. Japanese commitment to the UK depends on this new UK/EU relationship being conducive to their businesses. A relatively liberal immigration system is key. They want to be sure their companies have access to workers with the necessary skills, there is acceptance of highly skilled professionals in the banking and other sectors and skilled power plant construction workers. This all needs an appropriate visa regime.

There is concern that the UK government may impose further stringent visa requirements for foreign workers, affecting business operations. They need the inflow of skilled labour from outside the EU to be liberalised and stability in their staffing arrangements which requires relaxation, rather than tightening, of the systems for obtaining and extending visas, especially intra-company transfers. Beside Japanese staff in the UK, these companies also employ other EU member state nationals. They want this to continue, fearing additional clerical burdens on UK work visas for EU nationals, and make clear their reliance on inexpensive labour from Eastern Europe in both manufacturing and agriculture. Denied access to this labour source, companies will experience staff shortages and increased labour costs which in turn would impact on product prices. The document is stark in its language: “the European labour market could suffer great turmoil if workers who are nationals of either the UK or EU Member States could not freely travel between and stay in the UK and Continental Europe.” This opening salvo in the Brexit negotiations is an early indicator of specific immigration issues to be addressed. Migration is a significant component in a modern economy and its restriction risks reducing investment. Too little attention has been paid to this. The simplistic analysis looks at the net contribution of migrant workers after balancing tax paid and welfare benefits. But the economic question is more complex. The UK has profited from the labour market flexibility of EU membership. We will need to find a way to balance public expectations of a reduction in migration with the realities of maintaining a prosperous national economy in a globalised commercial world. This may prove impossible. The country may need to face the stark reality that growth is possible with migration but an over-restrictive visa regime will reduce inward investment with economic decline as the inevitable consequence.