A large cloud looms over the U.K. after it exits from the European Union

The uncertainty of the U.K.’s “Brexit” away from the European Union looms as one of the world’s biggest storylines since the shock vote that happened in 2016. There’s still a year away before the U.K. formally leaves the European bloc, but there are already concerns from other countries all over the world about the kind of trade agreements that will arise from the country’s departure from the EU. One of the concerned nations is Japan and, in an unusual move for the normally docile Japanese people, the country said that its companies would leave Britain if trade barriers made them unprofitable. Among the Japanese companies that could exit Britain include Toyota, Honda, Nissan, and Mitsubishi.

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The potential backlash of the U.K.’s Brexit is serious business

The potential backlash of the U.K.’s Brexit is serious business. A lot of industries are going to get affected, and for a country like Japan that considers the U.K. its second most important destination for investment outside of the U.S., the uncertainty of its future trade laws could have adverse effects on the Asian giant. Japan’s ambassador to the U.K., Koji Tsuruoka, made that point clear in a conversation with reporters. “If there is no profitability of continuing operations in the UK - not Japanese only - then no private company can continue operations,” he said. “So it is as simple as that. This is all high-stakes that all of us, I think, need to keep in mind.”

High-stakes. That’s a good way to describe Japan’s position here. The country has spent more almost $60 billion in the U.K. on the shoulders of a business-friendly base with the country. But those investments came with the potential of profitability, something that’s now going to be thrown into limbo until the U.K. enacts new trade laws that are independent of the European Union.

Among the industries that will be most affected is the auto industry. Collectively, Toyota, Honda, and Nissan build almost half of the U.K.’s 1.67 million cars. If these companies leave the country because of restrictive and unreasonable trade laws, the ramifications are impossible to predict. Safe to say it’s going to be in the realm of a doomsday scenario for the U.K.

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A Brexit-type move is not unprecedented in the annals of history, but it is today given how important the EU is in stabilizing the world’s economy

For now, everyone’s walking on eggshells. A Brexit-type move is not unprecedented in the annals of history, but it is today given how important the EU is in stabilizing the world’s economy. Any disruption to that will have an effect on the entire world. That fear and uncertainty is a big reason why major Japanese corporations have sought a two-year transition period, which they hope will ease Britain into its new relationship with the bloc.

It may be unfair to say that the responsibility to make Brexit work falls squarely on the U.K., but the country wanted this. Now that it’s on the precipice of exiting the EU, it needs to make sure that its trade relationships with the rest of the world don’t fall by the wayside as well.

References

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Read more Toyota news.

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Read more Honda news.

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Read more Nissan news.

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Read more UK news.

Source: Reuters

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