Asian firms with strong UK ties feel the heat after Brexit vote

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Brexit Were OutAsian companies with investments, services or manufacturing bases in the UK will have to reconsider their ties to the country as it prepares to leave the European Union (EU). Most Asian companies with a presence in the UK are using the island nation as a gateway to the European market, but are now forced to change their strategies as they brace for an extended period of uncertainty following the Brexit vote.

And this uncertainty will last at least two years until new trade arrangements with European countries are negotiated and signed, way too long for many firms. It is clear that following a Brexit, all existing UK trading arrangements with the EU, the European Economic Area (EEA) and the European Free Trade Association (EFTA) and the ones the EU has with the rest of world and are also applicable to the UK will be null and void until replacements are agreed. Thus, any business decision needs to be made on which new trading arrangements come into force, and this is highly unpredictable now.

It is also expected that the remaining 27-country bloc of the EU will give the UK a hard time in renegotiating such trade agreements and offer them either a membership in the EEA or nothing for preventive and political reasons as they want to avoid any more special deals for the UK at all costs.

Meanwhile, Asian firms that regarded the UK as a safe gateway to the EU’s single market see their investments at stake. Some of Asia’s biggest companies, namely from Japan, South Korea, Singapore, Hong Kong and India, which together employ thousands of workers in the UK in industries as diverse as car manufacturing, transport, energy, utilities, real estate development and information technology, face critical long-term questions about how their operations will be continued.

Asian multinationals which have their Europe headquarters and/or a sizeable presence in manufacturing or services the UK and sell most of it to the EU include Toyota, Nissan, Honda, Hitachi, Canon, Sony, Fujitsu, financial giants Sumitomo Mitsui Banking Corp. and Nomura Holdings, Hong Kong’s CK Hutchison Holding of billionaire Li Ka-Shing, Chinese property conglomerate Greenland Holding, Tata Motors, owner of Jaguar Land Rover, Samsung Electronics, whose European headquarters are in the UK, Korea National Oil Company, one of the largest South Korean investors in Britain, and many others, mostly medium-sized enterprises.

Japan’s direct investment in the UK alone has topped a total $98 billion last year, and more than 1,000 Japanese companies do business in the country, employing 140,000 local people.

Among ASEAN countries, Singapore-based firms have a high exposure to the UK market, namely property firms such as City Developments r hospitality companies such as Frasers Hospitality Trust, CDL Hospitality Trust, Ascott Residence Trust, as well as energy firm Sembcorp Industries.

The other way round, with the devaluation of the pound sterling, investment costs for UK companies in Asia are going to be significantly higher in the shrt- and mid-term which means that many firms will take a more cautious approach in their upcoming investment decisions in the region. Apart from that, a weaker pound and euro also means fewer UK and European tourists will be coming to Asia which will hit countries with a high dependence on income from tourism such as Thailand.

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Asian companies with investments, services or manufacturing bases in the UK will have to reconsider their ties to the country as it prepares to leave the European Union (EU). Most Asian companies with a presence in the UK are using the island nation as a gateway to the European market, but are now forced to change their strategies as they brace for an extended period of uncertainty following the Brexit vote. And this uncertainty will last at least two years until new trade arrangements with European countries are negotiated and signed, way too long for many firms. It is clear...

Reading Time: 2 minutes

Brexit Were OutAsian companies with investments, services or manufacturing bases in the UK will have to reconsider their ties to the country as it prepares to leave the European Union (EU). Most Asian companies with a presence in the UK are using the island nation as a gateway to the European market, but are now forced to change their strategies as they brace for an extended period of uncertainty following the Brexit vote.

And this uncertainty will last at least two years until new trade arrangements with European countries are negotiated and signed, way too long for many firms. It is clear that following a Brexit, all existing UK trading arrangements with the EU, the European Economic Area (EEA) and the European Free Trade Association (EFTA) and the ones the EU has with the rest of world and are also applicable to the UK will be null and void until replacements are agreed. Thus, any business decision needs to be made on which new trading arrangements come into force, and this is highly unpredictable now.

It is also expected that the remaining 27-country bloc of the EU will give the UK a hard time in renegotiating such trade agreements and offer them either a membership in the EEA or nothing for preventive and political reasons as they want to avoid any more special deals for the UK at all costs.

Meanwhile, Asian firms that regarded the UK as a safe gateway to the EU’s single market see their investments at stake. Some of Asia’s biggest companies, namely from Japan, South Korea, Singapore, Hong Kong and India, which together employ thousands of workers in the UK in industries as diverse as car manufacturing, transport, energy, utilities, real estate development and information technology, face critical long-term questions about how their operations will be continued.

Asian multinationals which have their Europe headquarters and/or a sizeable presence in manufacturing or services the UK and sell most of it to the EU include Toyota, Nissan, Honda, Hitachi, Canon, Sony, Fujitsu, financial giants Sumitomo Mitsui Banking Corp. and Nomura Holdings, Hong Kong’s CK Hutchison Holding of billionaire Li Ka-Shing, Chinese property conglomerate Greenland Holding, Tata Motors, owner of Jaguar Land Rover, Samsung Electronics, whose European headquarters are in the UK, Korea National Oil Company, one of the largest South Korean investors in Britain, and many others, mostly medium-sized enterprises.

Japan’s direct investment in the UK alone has topped a total $98 billion last year, and more than 1,000 Japanese companies do business in the country, employing 140,000 local people.

Among ASEAN countries, Singapore-based firms have a high exposure to the UK market, namely property firms such as City Developments r hospitality companies such as Frasers Hospitality Trust, CDL Hospitality Trust, Ascott Residence Trust, as well as energy firm Sembcorp Industries.

The other way round, with the devaluation of the pound sterling, investment costs for UK companies in Asia are going to be significantly higher in the shrt- and mid-term which means that many firms will take a more cautious approach in their upcoming investment decisions in the region. Apart from that, a weaker pound and euro also means fewer UK and European tourists will be coming to Asia which will hit countries with a high dependence on income from tourism such as Thailand.

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