Since various forms of Brexit deals were rejected and much debate over a decision by parliament members today to delay the UK departure from the EU, there are still many perspectives and concerns globally to continue to consider. As companies around the world continue pondering a hard versus soft Brexit, and everything in between, let’s have a look at an article providing perspectives from the APAC region.
Besides fearing chaos, APAC companies with investments in the UK have been watching and preparing for the possibility of a no-Brexit deal because it would mean the hit of a 10% tariff under the World Trade Organization rules and increase the costs of their UK entities and end products and ultimately get passed onto their consumers. One country in particular that would be hit is Japan because of their auto companies like Toyota and Nissan. Currently, Japan accounts for the sixth largest amount of investments in the UK, which is the largest from any APAC company, employing more than 140,000 people in the UK.
So, what approaches are APAC companies considering?
One approach to dealing with Brexit is where the APAC company moves their headquarters to another country, or countries, in the EU. Many cities within the EU have been courting companies to bring their business to their cities with tax breaks and other incentives. New relationships are being established to make this scenario play out. Largely, companies are looking at the Netherlands, Germany and Luxembourg as alternative options to base their headquarters. The UK has already seen many companies depart but many more may follow once a decision is made and details are provided.
Another reaction that we are seeing is that some APAC companies are halting or reducing their production. With the new tariffs that will be applied on the UK imports/exports, this has resulted in the UK being less of an attractive location to manufacture goods.
Then there are still many APAC companies taking the wait-and-see approach.
Just like most, the uncertain outcome of Brexit has created confusion for APAC companies. Many fear making any firm decision at this point in time until a more definitive understanding is available. Depending on the outcome, APAC companies will then have to decide what the best approach will be for their company and their UK European headquarters.
Regardless, the impact of any eventual Brexit deal will be seen and felt far beyond the borders of the UK and EU. The result will be felt by citizens and corporations worldwide. Talent mobility will definitely be impacted, but the degree of impact is still anyone’s guess.
Brexit uncertainties are a concern for Asian companies that export goods or services between the UK and the EU and over the border between Northern Ireland and Ireland; own manufacturing plants in the UK; have EU staff in their UK operations; rely on the same distributor for UK and EU markets; or have goods or services that will be exposed to different regulations in the UK and EU. Businesses fear if Britain’s Parliament fails to agree on a Brexit deal by the end of March, the country will leave the EU and sever all ties with the trading bloc of 440 million people. Britain will conduct trade according to rules established by the World Trade Organization (WTO), causing unprecedented challenges to cross-border business activities.