Japan's Brexit warning casts shadow over Softbank ARM promises Japan fired a shot across Britain's bows at the G20 yesterday, publishing a “message to the United Kingdom” warning that Japanese companies might relocate their head offices out of the UK if Brexit trade negotiations with the EU don't favour them. The 15-page document, couched in the clipped yet polite prose of international …
I do hope that at the next G20 Britain formally informs Japan that their country must surrender their sovereignty to China, and that unless they do so their economy will be considered a backwater. Clearly their home market is not large enough to sustain any industry. If they object we must remind them that their long history as an independent country is an irrelevance and the profit of multinational companies must take precedent. Educated people know that money is all that matters and it's morally right that all governments must surrender to the will of globalist corporations. Only knuckle-draggers respect the sacrifices of their ancestors.
Softbank may take the view that ARM is just IP and the people are just a cost centre, but they will discover their mistake in a few years.
ARM's current advantage is that they provide a cost effective and flexible design with very active development and some history.
If these change (particularly cost), there are competitors (MIPS as the most likely option, but Intel could conceivably compete if they can learn to live with wafer thing margins and POWER could work). It might take 4-5 years and the UK is unlikely to benefit in the way they do from ARM, but no IT company is guaranteed to succeed in the future.
ARM currently employ a lot of people doing stuff that could sell up their expensive Cambridge properties and move somewhere else in the world should their new owners ask nicely enough. After all the UK just became a backwater.
I think they may have worked out it will be a while before they need to move to 128 bits and most of their 64 bit work is done and dusted. Apart from the customisations for customers who just happen to be competitors.
I didnt like this deal and I'm quite convinced I've been ripped off for my shares and willl be ripped off for ARM products that come from anyone other than Softbank.
After all the UK just became a backwater.
Well, maybe the Japs should join the EU themselves, if they think its such a stellar deal. Given Japan's dismal growth over the past two and a half decades, and government debt levels that make Britain look solvent, I'd suggest they will fit right in with the remaining EU.
And after Germany has been forced to bail out Greece, then Italy, then the rest of Southern Europe, they could start paying off Japan's debt. Or maybe the German's won't. But how will the Euro and the EU cope with the insolvency of most of its southern half?
Arm are a design company with lots of licensees.
If softbank try and relocate all the engineering functions, most people will simply quit and join another company or start their own.
I can imagine that people there are already planning their exit strategy, to create a new startup.. I'm sure they already know about the open risc project which has some big names gathering behind it
http://openrisc.io
ARM have people in the UK. It's their skills that are of interest. The stuff is already made elsewhere.
However, suspect currently ARM's IP is assigned to a UK entity and hence all profits that accrue are subject to UK taxes. With a foreign owner, there is no reason why the IP created in the UK isn't assigned to some foreign entity - using tax sheltering arrangements not dissimilar to Apple's arrangements in Ireland...
"However, suspect currently ARM's IP is assigned to a UK entity and hence all profits that accrue are subject to UK taxes."
I'd expect it was assigned to a UK entity, ARM. ARM and its assets are now owned by a non-UK company. If it was assigned to some entity other why would SoftBank have bought ARM?
Who saw that coming?
Anyone who thought about the issues for about 5 minutes I'd say.
Actually the move of the EU Medicines agency is likely to upset a lot more people and a lot more money unless people think the EU would leave it in London and have the main offices of a major EU agency outside the EU.
In this universe I don't see that happening although I'm sure Home Secreatry (it's.. just...) Boris would bluffly argue the case.
The people of Sunderland are just getting to grips with Japan's membership of the EU and the impact it will have for Nissan!
The irony that a region so econimically dependent on EU membership and the single market voted so heavily to leave it isn't lost.
The fact that the normally very private and diplomatic Japanese have gone public with this shows just how much the rest of the world thinks we are a bunch of knuckle dragging half wits.
Welcome to Little Faragestan.....
"The irony that a region so econimically dependent on EU membership and the single market voted so heavily to leave it isn't lost."
Isn't it amazing that poor uneducated oiks tup north think democracy is more important than money - unlike so many wealthy toss pots sitting in their metropolitan echo chambers.
"Isn't it amazing that poor uneducated oiks tup north think democracy is more important than money - unlike so many wealthy toss pots sitting in their metropolitan echo chambers."
It would be well to remember that once we had a home grown motor industry. Its workers largely wrecked it in the '70s. Far Eastern investment gave us a second. It looks like its workers are now doing the same thing. Do you think anybody's going to give us a third?
"Its workers largely wrecked it in the '70s. "
Ahem. No.
Workers might have started kicking the cat later on in the piece, but successive governments and management had already screwed the industry with poorly thought out attempts to create employment by directing makers to build factories in unsuitable areas (on the govt's part, trying to be a command economy and create employment in depressed areas) and a succession of abysmal decisions, poor designs, poor equipment and piss-poor industrial relations from a disconnected management.
By the mid 1960s "British made" was a warning label and the _only_ reason anyone outside the UK bought british cars (or electronics) was because there was no other choice (other countries' cars or electronics were heavily taxed) or government directives (government departments) - and in virtually every case paid an extremely heavy price due to unreliablity
To give an idea of how well regarded british cars really were: When New Zealand relaxed tariffs against japanese cars in 1973, british cars went from 40% of the market to 3% in less than 12 months - and when GM tried to reintroduce the Vauxhall brand in the late 1990s they managed to sell 3 out of a batch of 10,000 Vectras before giving up and sticking Opel badges on the things (at which point they sold quickly).
My maths teacher was a transplanted brit who'd worked as a designer for Gradall (the people who make graders). He quit in disgust and emigrated after senior management systematically went through and weakened every part of a gearbox he'd designed to ensure that parts would fail, in order to have an ongoing maintenance business. Other engineers I met whilst growing up told similar stories. Management treated everyone (customers and workers alike) with contempt and viewed them as a source of easy profit or cost reductions. In that toxic atmosphere it's no wonder the trade unions got militant and faced with management who made it "us and them", no real surprise that staff got collectively angry enough to walk out at the slightest provokation.
The real tragedy is that many UK companies seem to have been inspired by the UK management spirit that made British Leyland such a world dominating power and seem determined to emulate that success instead of using the lessons from those years to make things better all round.
Please Doctor Syntax, slow down a bit. "workers largely wrecked it in the '70s". Did the "Far Eastern investment" bring new workers with them or was it perhaps about bringing modern production methods and tools, design, quality and quality control to a country who had totally lost the plot. and not just in the auto industry.
As long as their democratic choice doesn't convert into unemployment benefits, dole and financial handouts to the regions affected due to aforementioned foreign businesses moving away then they have their democratic right.
Oh wait, TTIP is around the corner, then they will wish they were still in EU once we all get shafted, yours truly included.
Apart from the canard about democracy (the EU is plenty democratic, with MEPS (er, directly elected) the Council of Ministers (er, appointed by the directly elected government of member states) and the Commission (er, appointed by directly elected national governments) -- I think you may find that the fine people of Sunderland change their minds at some point in the next 5 - 10 years, when they're all out of work. Somehow I doubt Farage, Boris or Oiky Gove will be spending much time basking in the adulation of all those unemployed car workers once they've radically downsized the Sunderland, Swindon and other remaining car plants in the UK. Time will tell...
"The EU isn't just undemocratic is is specifically anti-democratic."
Could you explain that?
And if it does not act, directly or indirectly, in the interests of European citizens, then who does it work for? Some claim it's communist body, others that it serves big business - can't be both.
Farage has already left the Building and was last seen sucking up to the Trumpeteer in the USA. Perhaps he should stay there with his BMF Donald.
All it would take is for one big company to up sticks and the rest of the sheep will follow. Then what eh?
Who's gonna pay the dole for all those out of work? It won't be London as that will be a ghost town with all the City jobs moved to Frankfurt. any of the countries in souther Europe would only be too glad to welcome a nissan or hitachi or BMW to their patch. with 25% unemployment they would be mad no to give those companies a sweetheart deal like Eire/Apple.
That's what the exiteers did tell the electorate and the remainers didn't either. Says something about the quality of the Politicians we trust our futures too eh?
"Isn't it amazing that poor uneducated oiks tup north think democracy is more important than money - unlike so many wealthy toss pots sitting in their metropolitan echo chambers."
A democratic vote would be one where the Demos was fully informed and thus able to have some chance of actually making a correct decision. Not only were the benefits and penalties of our EU membership so complex that ensuring that everyone was sufficiently informed was an impossible task, the electorate were also lied to about nearly every aspect of our EU membership.
Irrespective of whether leaving the EU turns out to be a good decision or not, the actual referendum can in no way he considered a meaningful exercise in democracy.
"Isn't it amazing that poor uneducated oiks tup north think democracy is more important than money - unlike so many wealthy toss pots sitting in their metropolitan echo chambers."
Let me know how you get on at Tesco's when you offer to pay in this new currency of "democracy" for your kids food.
The real irony is that the "wealthy toss pots" wont suffer as a result of this as they aren't working in the car factories but those democracy loving Northerners probably will.
"... unlike so many wealthy toss pots sitting in their metropolitan echo chambers."
Apols for quoting one of my earlier posts, but it's those horrible metropolitan folk who pay taxes to support economically weaker areas (and who would be expected to subsidise loss-making industries):
UK: GBP 165 billion tax / 30.4 million taxpayers = GBP 5,427 tax/capita
London: GBP 38 billion tax / 3.9 million taxpayers = GBP 9,743 tax/capita
2013 - 2014 data, source: https://www.gov.uk/government/statistics/income-and-tax-by-county-and-region-2010-to-2011 Please do check the figures, bit outside my field.
----------
"Isn't it amazing that poor uneducated oiks tup north think democracy …"
Wot democracy? A party gets 37% of the votes and 52% of the seats in Westminster? Unelected House of Lords? The PM (unelected as such) potentially invoking Article 50 under royal prerogative rather than after a vote in Parliament? Pull the other one, it's got bells on.
Many of the areas that overwhelmingly voted for Brexit were dependent on EU infrastructure funds, as evidenced by various broadcasters visiting said regions and asking people on the street *why*, given said dependence. The answer was "we pay £350 million a week and all we got was..." or similar. It boggles the mind of anyone remotely clued up, but it also goes to show how much the print media and fearmongering had an impact on the vote.
But, that said... we've made our bed, now we have to lie in it, suck it up and brave it out. Sunderland (Nissan) and County Durham (Hitachi Rail Europe) will have to realise how they f***ed the golden goose that provides them with employment and hope things *don't* change... HRE has committed funding for a number of years for the IEP project (and the DfT is paying them a handsome amount of money for a couple of decades) and the AT300 trains for GWR, but I would not be surprised if they quietly moved HQ functions back to the continent at some stage. Nissan, well... their most efficient plant in Europe *is* Sunderland, so unless efficiency suffers (and that includes the cost effectiveness of its output), they're likely to stay for a while still. Ditto for Swindon (Honda) and Oxford (BMW) where the permanent staff weathered the recession reasonably well (agency workers were all the first to go when the recession hit). JCB oop t'North, well... "we're alright, innit?"
As the Japanese ambassador pointed out on the radio this morning, WTO car tariffs of 10% are significantly bigger than the profit margin on car manufacturing. How long do you think Nissan will bear losses on every car they build? (Hint: they will be looking at two lines on a chart -- aggregate losses vs cost of mothballing the plant and paying out 4000 redundancy cheques.
"As the Japanese ambassador pointed out on the radio this morning, WTO car tariffs of 10% are significantly bigger than the profit margin on car manufacturing. How long do you think Nissan will bear losses on every car they build?"
Wrong. The losses will only apply to exported cars. The UK government could subsidise those exports using the income from import tariffs at no net cost to the UK taxpayer.
Their staff costs have just fallen by 10% to offset this.
Also they could avoid import duties by exporting incomplete vehicles to another plant in the EU which could finalise them for the EU market (adding left hand drive / exhaust etc).
WTO rules explicitly ban subsidies that counteract import or export tariffs. Please note that a 10% rate also applies to vehicle parts, so exporting incomplete vehicles to another EU plant is not a realistic option. Any exports will also be hindered by the admin overhead introduced by WTO rule of origin regulations.
"I would not be surprised if they quietly moved HQ functions back to the continent at some stage."
I would also be surprised if HRE start any new build projects in the UK.
Likewise it's quite likely that announcements of new models from Nissan/Toyota/Honda/BMW/etc will come with the news that they're to be built in eastern europe.
JCB is already making a large proportion of its product outside the UK. They'll just slowly ramp down what they're doing here.
Manufacturing businesses can't stand uncertainty. It drives their costs sky high. It doesn't matter that there's been a bounceback reported in the last month. Every week of foot dragging on announcing Brexit or No Brexit increases the liklihood that manufacturers (even wholly "british" ones) will up sticks and move to the mainland in order to guarantee long-term stability.
Negotiations took the first two weeks of July. So if they were to later turn round and say how bad Brexit is and they couldn't keep their promises, that would be a little... cheeky.
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Every time I hear of these promises all I can picture is Neville Chamberlain stepping out of an aeroplane waving a piece of paper.
If Neville Chamberlain hadn't bought 11 months peace by knowingly accepting The Austrian's false assurances, then Britain would have started the war without the means to defend itself. The limited and unsuccessful BEF mission would have been yet smaller and Germany would have strolled up the French coast even quicker. With no meaningful air power the RAF could not have stopped the Luftwaffe, and Britain would have had to sue for peace in months, on German terms.
It should also not be forgotten that the Labour party vigorously opposed rearmament. Good to see that Corbyn follows his party's mould.
Now that's complete BS. All the history books says that the Germans were taking a gamble invading Austria and Czechoslovakia and were ready to retreat if the English and French shown any kind of resistance, they were planning for a war in 1942 onward. All Chamberlain did was encouraged more aggression earlier.
I don't think ARM would be affected. I don't imagine they sell much in the way of chip designs into Europe? And even if they did, any European tariffs could probably be avoided*. It's the companies that make physical things, or sell financial services, that could have a devastating impact on the UK economy because of Brexit, *if* suitable terms cannot be agreed with the EU.
*By selling to a subsidiary at the point of manufacture, for example, which wouldn't usually be in Europe. The designs could even be created in the UK, but sold out of Japan. They wouldn't even need to declare any profit in the UK...
They employ LOTS of Europeans and more specifically LOTS of Eastern Europeans.
All of those were jobs supposedly "taken", according to the BrExiters.
So, if BrExiters are right, half of ARM's workforce should be on the first plane to Sofia, Bukuresti, Timisoara, wherever and it will be replaced by qualified educated British engineers whose jobs were supposedly taken and who are now out of work.
WHERE ARE YOU QUALIFIED UNEMPLOYED BRITISH ELECTRONICS ENGINEERS. Emphasis on QUALIFIED. BIG ONE.
Can't hear any answers. Oh, well, we can just see most of Arm being in Constanta in a year or two. Closer to the seaside and some sunshine too.
"I don't think..."
There. You've clearly identified your ignorance in this matter, so we can all ignore the rest of what you say.
ARM license worldwide, including to a lot of European design houses or to countries that already have trade deals with the EU (including both services and IP protection)
We are leaving the EU and don't yet have any trade deals independent of the EU, and the EU and the rest of the world have no concrete idea of what our new relationships will be like (or how our various regulatory regimes will interact with the rest of the world). We are now a risk for such companies.
"There. You've clearly identified your ignorance in this matter, so we can all ignore the rest of what you say."
Beat me to it.
But it's not surprising that many commentards do not have a clue about ARM or ASIC/microelectronics IP in general. It's not stuff that any end users/consumers can go out and buy.
"But it's not surprising that many commentards do not have a clue about ARM or SIC/microelectronics IP in general."
Correct. I know such a company like ARM, but specialising on embedded processing. It's the people that build up the IP in such a firm. People out, that's just no business left over. The existing IP rapidly diminishes in value in the current microelectronics market. It's milking the cow and not feeding it. It just dries up.
Not sure on this. I think its more cars - Nissan and Honda.
Any change to to EU tariffs will but a downer on the UK export model.
Arm? Less so.
Softbank's head office remains in Japan.
There's a world of difference selling IP than there is to heavy lumps of metal with a wheel at each corner.
Not so much as you might think. The EU single market is for the Goods, Capital, Services and Labour. IP licencing either counts as an intangible good or a service depending on how you package it. Providing IP requires labour, a significant fraction of the current ARM labour force is sourced from Europe.
If you you were softbank, I suspect considering a move to an EU country where they already have the required treaties/regulations and there are going to be no surprises would be top of your agenda for ARM.
It looks you missed the part in the article that explicitly cites that. Right now IP is automatically protected EU wide. Tomorrow?
The slower Britain starts (and finishes) negotiations, the more fear, uncertainty and doubts will raise in companies with business - or planning it - in Britain. There are too many unknowns which are making impossible to design acceptable plans.
Nobody knows what will happen, Britain may bet it will have good deals, and everything will be as before is not better - but it's just a bet Britain can also lose. If other countries enter a protectionist climate ("make France great again", "Make Germany great again", etc. etc.), it won't help Britain at all....
I see the media are going into Brexit propaganda mode yet again, could it be do with parliament discussing a possible second referendum?
Lets say they have another vote or dismiss the reasons why people voted Brexit, what do they think will happen next?
My guess is that a right wing party will get to power and they we are all well and truly fooked.
They bought the company after the vote so there is no excuse for not keeping with their promises.
If we don't find a way to resolve the issues we face from Brexit then we are well and truly fooked anyway. More worrying it seems from my reading of the Telegraph, the comments section of the Guardian and The Independent that those who are truly invested in Brexit actually see these issues, their non-resolution and being fooked as a good thing.
"There won't be a second referendum. End. Of. I believe Theresa May has been crystal on that."
Like she was crystal on her definition of 'everyone' when she said she would make a 'Britain that works for everyone'.
I rather think her definition would be quite different from yours or mine.
I see the media are going into Brexit propaganda mode yet again, could it be do with parliament discussing a possible second referendum?
The status of the referendum is legally suspect. Technically it can only be advisory to Parliament, which is sovereign and fully within its rights to turn the advice down. Weird, that David Davis didn't mention this in his speech today, don't you think?
Whether it would be advisable for Parliament to do so is, as you rightly point out, another matter. Though it looks like May is quite happy to sit out the full five years, and without government support it's impossible to call an election earlier.
All this just means more uncertainty for the country and this is most certainly bad for business. However, every day means more younger voters coming of age and more EU residents being awarded residency and citizenship. Given those potential millions, who knows how the country would vote in a couple of years. Well, after Jezza has retired to the Fidel Castro Retirement Home for Deluded Trotskyists that is.
Did it say UK or British Isles for example?
Was it a guarantee or an intention?
Even then it would be quite simple to situate all the expansion next to the Irish border, moving it to the other side (and retaining staff) if we leave the EEA.
The mere fact that the letter is given at the G20 means that many of the companies that signed up to it already are preparing their own Brexit. I doubt that any of them are going to sit and wait for the current govt to make up their minds. If they had downplayed the migration issue being the culprit for Brexit they might have had more leeway in negotiations, but as May has made that a main issue in negotiations joining the EEA has become a major problem.
Dropping into the WTO agreements from the current position is something any manufacturer will want to avoid. Financial services will also think twice if London is all that pleasant without passporting and standard WTO rules. Leaving the EU can take as long as 6 to 20 years and then you still don't know what the new situation will be. Business hates uncertainty and many will take seek certainty abroad and take the write-off as a tax rebate. The local mothball industry will probably flourish for the upcoming few years though.
It is pretty horrid to see the disaster unfold in slow motion. Where's a whiskey icon when you need one..
"it is the first time ever I feel little sympathy for the poor and the uneducated."
What a horrible comment. I voted to remain, and was surprised at the result. But it made me wake up and try to listen to those who wanted to leave. The reasons are many, but a common thread seems to be a feeling of alienation. Lives are controlled by people far away. The Japanese government has made its opinion fairly clear. It's understandable. Our government needs to address that, but at the same time it can't ignore the feelings expressed in the referendum. A difficult job. And although I've never voted Tory in my life, Theresa May seems the most interesting Prime Minister in my lifetime (Harold McMillan is the first PM I remember). I hope she does well with this task.
I have every sympathy for the poor and uneducated. Whether out of compassion or fear that they'll hang me from a lamppost makes little difference.
Leaving the EU can take as long as 6 to 20 years
Leaving the EU with a good deal could take that long. There are other options where the UK still spends 6-20 years disentangling itself but actually leaves nearly empty handed in no more than 2 years. Given the various UK biased 'deals' assorted soft brexiteers (and May) are talking up and the hard-brexit idiots, I'm guessing 2 years is more probable.
Suicide notes are usually written in haste.
The UK has a long history of "leaving nearly empty handed", then invariably betting on a losing horse.
It was typical of the Eton educated crowd to have been such efficient losers.
Why break such a great British public school tradition?
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