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Business trends

Japanese companies call for clarity as UK votes to delay Brexit

Honda and drugmaker Eisai activate contingency plans as leave date approaches

The flags of the European Union and the U.K. fly during a demonstration outside the Palace of Westminster in London.   © AP

LONDON -- Following a chaotic week in British politics, Japanese businesses repeated their calls for clarity over Brexit, with some already acting on their contingency plans as Parliament voted Thursday to seek a delay to the U.K.'s exit from the European Union.

Uncertainty remains as a request to delay the departure date by three months is conditional on Prime Minister Theresa May's twice-defeated withdrawal deal gaining parliamentary approval next week. If the deal is rejected again, the U.K. would still request a delay but the reasoning or length of extension is currently unknown.

"Any extension of Article 50 must be purposeful and long enough to give business stability," a Honda Motor spokesperson said.

Some of Honda Motor Europe's contingency plans have already been triggered, the spokesperson said.

"Following the series of votes in parliament this week, we are now looking to the government to deliver a clear, legally certain, path forward to avoid no deal and to reach an agreement with the EU that delivers the conditions that support the continued competitiveness of our European operations," the spokesperson said.

May's government suggests a longer delay may be necessary if the deal is again rejected, but the motion approved on Thursday does not indicate the length or purpose of such an extension. Any U.K. request for an extension would then need to be agreed upon unanimously by the 27 remaining EU member states.

Japanese carmakers are significant investors in the U.K., producing half of the cars made in the country and supporting high-skilled jobs directly and indirectly through its supply chain. They are also reliant on integrated supply chains across Europe.

However, the last month has seen a slew of business decisions go against the U.K. In February, Honda announced it will be closing its U.K. factory in 2021 as it moves manufacturing out of Europe, while Nissan Motor, which has had a production base in the country since 1986, announced it would reverse its decision to make the X-Trail in Britain.

Automakers are not the only industry reacting. Eisai, a Japanese pharmaceutical company that employs more than 11,000 people worldwide, said irreversible business decisions have already been made.

"As a business we have spent considerable resources and time putting in place detailed contingency plans for a 'no-deal' Brexit and also for the implications for our industry of a 'deal,'" said David Jefferys, senior vice president of global regulatory and public affairs for Europe, the Middle East and Africa.

As part of a heavily regulated sector that is deeply integrated across Europe, Eisai has had to make "major changes" even for a deal scenario, Jefferys said.

"These have been fully implemented at considerable cost and will not be changed. Key functions have been moved to EU 27 locations in Germany and Antwerp," he said, using the term for the EU without the U.K.

Overall, around 1,000 Japanese companies are currently based in the U.K., supporting around 140,000 jobs, according to the Japanese Embassy.

The Japanese Chamber of Commerce and Industry in the U.K. said a shorter transition would be better.

"A long extension is not preferable because it would add to the unknowns," said Takaaki Hanaoka, secretary-general of the U.K. Chamber. "However, Japanese businesses have made all the preparations they can, and we do not expect a big impact."

First and foremost, the Japanese Chamber does not want a no-deal Brexit. "We would like the Brexit schedules to be decided, which would decrease uncertainty," Hanaoka added.

Following the vote in the British parliament, a spokesperson for the EU Commission said, "It will be for the European Council to consider such a request, giving priority to the need to ensure the functioning of the EU institutions and taking into account the reasons for and duration of a possible extension."

With only two weeks to go, lacking an approved deal, an agreed extension, or a cancellation of Brexit, the U.K. would crash out of the EU on March 29 without a transition period. This would see customs and regulatory barriers suddenly re-introduced not only between the U.K. and EU, but for countries like Japan and South Korea, with which the U.K. trades through EU-wide free trade agreements.

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