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European and Japanese business groups warn of Brexit impact

The London skyline is seen from the Shard, the tallest building in the European Union, as the sun sets on March 28, 2017 in London, England.
Jack Taylor | Getty Images
The London skyline is seen from the Shard, the tallest building in the European Union, as the sun sets on March 28, 2017 in London, England.

Overseas companies that invest in the UK issued a flurry of warnings on Tuesday about the threat Brexit poses to their businesses, signalling their growing concern as the UK prepares to start the formal process of leaving the EU.

Forty European business lobbies, representing 20m companies in 34 countries, issued a statement calling for a post-Brexit settlement which would preserve the integrity of the single market, deliver a smooth transition and avoid creating "unnecessary" obstacles to trade and investment.

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Meanwhile, Japan's Keidanren, the powerful business group whose membership includes Toyota, Hitachi and other large Japanese investors in the UK, is preparing a communiqué taking issue with Mrs May's "no Brexit deal is better than a bad deal" — a comment that has sent a chill through the boardrooms of Japanese companies that collectively employ an estimated 140,000 people in the UK.

"The key message is this: please negotiate with deeper consideration for the economy," said a person who has seen a draft of Keidanren's demands and policy proposals, which are expected to be released in early April.

The letter, which revives earlier warnings from Japanese corporate leaders of Britain's "cliff edge" exit from a market of 500m consumers, would be the third major representation from Japan since the June 2016 referendum.

Other foreign investors, however, have struck a more positive note, with Deutsche Bank planning a move to new London headquarters in 2023, despite uncertainty over the outcome of Brexit negotiations, and Siemens, one of the world's largest engineering companies, reaffirming its commitment to the UK in at an event in Berlin on Monday. Siemens employs more than 15,000 in the UK.

The Brexit warnings from business group representatives came on the back of rising public recognition by individual companies of their fears over the impact of a hard Brexit that does not include a trade deal or transitional arrangements.

"A significant number of EU and UK jobs depend on exports, and production processes are profoundly intertwined across the wider Europe," said BusinessEurope in a statement by groups including the BDI in Germany, Medef in France, the CBI in the UK and Poland's Lewiatan. "Negotiations should be led in a true spirit of partnership and mutual loyalty."

Almost one in 10 German companies in the UK plans to respond to Brexit by shifting investments to other EU states even though the departure terms are not yet known, according a survey of 2,200 companies published on Tuesday by the German chambers of commerce and industry (DIHK). About 40 per cent of the enterprises also expect business to weaken in Britain.

"Brexit will significantly damage the business of German companies with the UK," said Erik Schweizer, DIHK president, adding that exports to Britain were already down 3.5 per cent last year, with most of the decline coming after the Brexit vote in June.

The warning came on the same day as Bertelsmann, Europe's biggest media company by revenues, said that it might move some of its business from London in the event of a hard Brexit, amid concerns that a British withdrawal from the single market could leave the company with a massive tax bill.

"If Brexit results in significantly higher costs for our business we would have to reconsider our position," said Thomas Rabe, chief executive of the German TV, publishing and music group, who said that the company would make a decision in 2018.

Since the EU referendum vote, Google has said that it will proceed with plans to open a new headquarters in London and almost double its headcount there. Facebook, Amazon and Apple have also all announced plans to increase hiring or property investment in the UK.