Picture: REUTERS
Picture: REUTERS

Tokyo — The growing alarm after UK Prime Minister Theresa May’s Brexit deal suffered a defeat in parliament isn’t just unsettling for British politics. Global businesses are on edge as well.

Asian companies, whose operations and investments stretch far into Britain and Europe, have a lot at stake as they face higher tariffs and costs. Tuesday’s setback will do little to cure the anxiety. Chancellor of the exchequer Philip Hammond has sought to assure business leaders that their no-deal nightmare scenario could still be avoided, but with only 10 weeks left before the UK is due to leave the EU, companies are bracing for a potential hard exit.

“Japanese companies should have been making preparations for the possibility of a hard Brexit, but now the reality of carrying out those measures is getting closer,” Hiroaki Nakanishi, chair of the country’s largest business lobby Keidanren, told reporters in Tokyo on Wednesday.

Here’s what Asian companies are saying about Brexit:

Honda, the Japanese carmaker, said on Wednesday a hard Brexit would seriously affect its European operations, even though it is implementing countermeasures. New checks at the border could disrupt its logistics systems, while tariffs on goods moving between the EU and UK would hurt its competitiveness, it said.

“We now look to the government to deliver a clear, legally certain path forward to avoiding no deal and to delivering the conditions that support the continued competitiveness and productivity of our sales and manufacturing operations,” the company said.

About 4.5% of Honda’s sales come from Europe, and it has one factory in the UK with a manufacturing capacity of about 150,000 units annually.

Asia’s biggest carmaker has said it will temporarily halt its production in the UK if Britain storms out of the EU without a trade agreement, disrupting weekly revenue of £60m ($77m) generated there, the company’s Europe president, Johan van Zyl, said in October. Japanese firms wants tariff-free trading after Brexit, he said.

Toyota declined to comment on the vote on Wednesday.

Of the 144,000 vehicles — Auris hatchbacks and station wagons — Toyota built in 2017 in the UK at its factory in Burnaston, England, about 87% was shipped to the EU. Toyota has another plant for engines at Deeside, Wales. Both were established in 1989 and started production in 1992. They have made more than 4-million cars and 5-million engines. The company has invested about £2.5bn in the facilities, employing about 3,000 people.

Sony, grappling with questions over its employees and distribution and sales channels, said on Wednesday it is closely monitoring the Brexit news. Its European head office is located southwest of London in the town of Weybridge. The Japanese technology giant has a sales office and a factory in the UK.

Panasonic said on Wednesday it is preparing for different scenarios to limit the fallout. It shifted its Europe head office from near London to Amsterdam on October 1, and transferred about 10 people from the facility as well. The move was made partly to ward off potential negative effects of Brexit and also because the electronic maker’s holding company was already based in the Dutch city, it said in August. The company, which produces televisions, digital cameras and tablets in the UK, won’t move its factory, a spokesperson said in October.

CK Group 
The CK Group has one of the highest exposures to the UK among Asian business empires, with operations there ranging from ports to infrastructure, telecommunications and retail. Its billionaire founder, former chair Li Ka-shing, has warned that Brexit would bring considerable challenges to the UK and Europe for years.

Li’s son, Victor, who took over as chair of the group in 2018, has echoed the cautious view. In a speech to employees in January, the younger Li cited Brexit as one of the big political and economic challenges CK will need to weather this year.

CK, which operates the Three mobile network and Superdrug stores in the UK, has reduced its exposure to the UK since the 2016 shock referendum, but the country remains the group’s biggest profit and revenue generator. At the CK Hutchison Holdings flagship, 19% of total sales and 30% of earnings before interest and taxes came from the UK in the first half of 2018, the company’s most recent financial report. That’s down from 21% and 39%, respectively, two years earlier.

Japan Tobacco 
Japan Tobacco said on Wednesday it’s assuming a “negative impact” on exports and imports. “We’re always looking at how to improve efficiency in our global supply chain by taking into consideration cost, taxes and other regulations,” a spokesperson said. The company sells Camel and Winston cigarettes in the UK and had about 41% of the country’s tobacco market as of September. The cigarettes sold in the UK are made in and imported from the EU region, according to the company.

Asahi Group Holdings, Japan’s largest brewer, owns and sells European beer brands Peroni and Grolsch in the UK — brands Asahi picked up from Anheuser-Busch InBev in a deal worth $2.9bn in 2016. In the event of a hard Brexit, its Peroni brand would likely be affected due to its large presence in the British market — the beer is brewed in Italy and exported to the UK.

Asahi’s flagship Super Dry is also made in Italy and exported to the UK, but it still has only a fledgling presence in the beer market there. A company spokesperson said Asahi is focused on strengthening its name as a premium beer brand in the UK market, and said it is too early to comment on any potential business consequences. 

Hitachi Construction 
Hitachi Construction Machinery, which makes equipment such as excavators, has said earlier if high tariff rates were to be imposed on after-sales service parts sourced from its Dutch manufacturing base, it would consider shipping them from Japan instead. Though the impact is minor, there are concerns over supply chains, foreign exchange, duties and regulatory changes, a spokesperson said on Wednesday. The company said in October it isn’t planning to cut its operations in the UK, where it owns a sales unit.

Jaguar Land Rover 
The maker of the iconic British brands said this month it plans to slash 4,500 jobs worldwide, about 10% of its workforce, in response to the sales slowdown caused by Brexit, a downturn in China and flagging demand for diesel-powered vehicles. The cuts come on top of the 1,500 people who left the UK’s biggest carmaker in 2018. CEO Ralf Speth warned in September that a no-deal Brexit would wipe out the luxury carmaker’s profit and a bad one could cost the carmaker more than £1.2bn a year and put tens of thousands of jobs at risk. Free access to Europe’s single market is “as important a part to our business as wheels are to our cars”, he said. The company, owned by India’s Tata Motors, employs more than 40,000 in the UK and has four plants in the country that produce 3,000 vehicles a day.

Nomura Holdings, Japan’s biggest securities firm, plans to ask fewer than 100 of its London-based staff to move to Europe in preparation for Brexit. The firm said on Wednesday it is “making arrangements to ensure that all current client and counter-party relationships, and access to Nomura’s services, will continue without disruption after the UK leaves the EU’’, it said. It is proceeding on the assumption that UK-based financial services firms will lose so-called passporting rights to operate in the bloc. Nomura, which chose Frankfurt as an EU base after Brexit, has about 3,000 employees in the region and most work in London.

Mitsubishi UFJ 
Mitsubishi UFJ Financial Group, which has about 2,000 staff in London according its website, has been preparing for Brexit by setting up some operations in Amsterdam. Japan’s biggest bank already does commercial banking in the Dutch city and got a securities licence there in December, calling it a “major step” to continue providing services to clients in Europe after the UK leaves the union. The company is closely monitoring Brexit developments but doesn’t anticipate any impact from it, spokesperson Kana Nagamitsu said on Wednesday.