UK: Why we like the Japanese - so far.

UK: Why we like the Japanese - so far. - They came, they saw and they settled; but success depends on whether the Japanese are co-operators or conquerors, writes Roger Eglin.

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Last Updated: 31 Aug 2010

They came, they saw and they settled; but success depends on whether the Japanese are co-operators or conquerors, writes Roger Eglin.

It is difficult to recall any business issue which unites the Government and the Labour Party. But there is one area of policy in which the positions of the two are so close it would be impossible to slide a playing card between them. This is on the question of Japanese investment in British industry. On a recent visit to Tokyo, shadow Chancellor John Smith told Japan's leading business organisation, the Keidanren, that a Labour government would encourage an increase in Japanese investment in this country and that the example of Japanese training was one that Britain should follow.

Not to be outdone, the Foreign Secretary, Douglas Hurd, made it clear in a statement that Japanese investment in this country was a success and the Government would welcome more of it. Though there were still a few barriers in the areas of leather, sugar confectionery and services, even the trade disputes of 10 years ago had largely been solved, Mr Hurd said.

Even the most superficial of observers would find it difficult to challenge the proposition that Japanese investment has been good for this country. It is clearly a two-way street. Because economic relations between the two countries have remained so good - even during moments of tension on trade issues - the Japanese seem to have designated Britain as their principal manufacturing base within the European Community. The fact that more than 90 Japanese companies have decided to set up manufacturing facilities in this country in the past three years and that more than 35% of Japanese investment comes here has compelled even countries like France to try to put memories of such upsets as the video recorder battle of Poitiers behind them.

The motor industry, after taking a bad knock from Japanese imports, has been revitalised. Rover would probably not have survived without the Honda partnership, but is now looking surprisingly strong in an appallingly bad car market. Its adoption of "lean", quality-conscious, Japanese-style manufacturing techniques is transforming productivity and the quality of its cars. Nissan's growing output from its Sunderland plant, more and more of it going to export, which will soon be joined by Toyota's at Derby, is bringing about the first improvement in the motor industry's balance of trade in a decade or more.

Other industries are benefiting - electronics, machine tools and television manufacture are some - and there are others, like the manufacture of video recorders, where there was no native industry until the Japanese arrived.

In a more general way, too, the Japanese presence has been enormously valuable. What Japanese managers have been able to extract from British workers in the way of productivity, dispute-free industrial relations and quality of performance has helped to demolish the notion that there is a chronic British disease. We know now that there is nothing wrong with the UK workforce provided that it is properly led and trained.

Yet this harmonious picture could scarcely be more at odds with the tense and increasingly hostile relationship developing between the United States and Japan. Trade friction is getting worse; unions and politicians are becoming increasingly concerned by the scale of Japanese investment. It is hard to see the relationship improving. It raises the question: will what upsets the US become an issue in the UK?

I suspect not. Partly because this country is less insular than the heartland of America but also for an important but less obvious reason. US industry has suffered and is still suffering from Japanese competition. The motor giants of Detroit have taken a pasting at the hands of the Japanese and are still on the receiving end. The Americans feel that they are being outdistanced in the high technology development race.

In this country the Japanese have moved into areas where our industrial performance had become so poor - cars, electronics and machine tools are all good examples - that they were welcomed as saviours rather than competitors. Less overtly chauvinistic than the Americans, we have had the honesty to recognise that much of our industrial capability was cut down by our own incompetence, not by the Japanese competition.

What we should be looking for is the development of a more sophisticated second phase with an increase in the number of joint ventures and more opportunities to share in the profits.

Some progress is being made. The Virgin group has successful joint ventures with Japanese partners, as does Tootal, the textiles company. Japanese companies are opening research labs here. Without such partnerships we risk moving down the same road as the US and towards the sort of "We don't want to know you" battle which ICL is having with former European research partners, now that it is Japanese owned. UK firms have to play their part but in the end everything will turn on whether the Japanese see themselves as conquerors or co-operators.

(Roger Eglin is managing editor of the Business section of The Sunday Times.)

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