Japan's Brexit warning casts shadow over Softbank ARM promises

Japanese companies are unhappy ... but what about Japanese-owned firms?

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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 diplomacy, was made available publicly on Saturday.

Amongst other things, the unsigned letter demands that the UK and the European Union act to ensure “maintenance of the access to workers who are nationals of the UK or the EU” and “unified protection of intellectual property rights” once Britain's exit from the EU is complete.

ARM, the Cambridge-headquartered chip design business, was bought by Japanese investment firm Softbank for £24.3bn in July. Shortly after news of the deal went public, a month after British citizens voted to leave the EU, Softbank promised to “at least double the employee headcount in the UK over the next five years.” ARM currently employs about 4,200 people.

The majority of ARM's revenue comes from licensing its chip designs to manufacturers of mobile phones and other devices. Its latest results revealed that the firm signed 25 licences in Q2 this year, adding plenty of future potential to its £267m revenue and £130m pre-tax profits for the quarter.

Yesterday's news from the G20 summit of heads of government casts a shadow over Softbank's promises to leave ARM largely untouched. While ARM is a British company employing British staff in Britain, the firm announced today that it is now under effective control of Softbank, with the Japanese company taking ownership of all of its shares. In addition, Softbank executive Ren Tanaka is now its “General Manager, ARM Business”, as ARM's board all stepped down today.

Even as ARM's execs eye up their £54m stock windfall from the sale of the company, Sky News reports that Japanese pharmaceutical companies – which also trade extensively in intellectual property – are uneasy about Brexit, mostly because they fear the EU Medicines Agency regulator may move out of London.

The public release of Japan's Brexit demands appears to have taken most of the UK's political and business establishment by surprise, though the BBC reported that the Prime Minister's office received the letter last week. ®




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