Japan’s richest man has warned that Brexit is “practically impossible” and could take the United Kingdom back to the economic stagnation of the 1970s when the country was often described as the “sick man of Europe.”
Tadashi Yanai, the billionaire founder and CEO of Fast Retailing (FRCOF), said the United Kingdom had benefited for many years from being an open economy. Brexit would change that, he said, and would prompt many talented people to look for employment elsewhere.
Leaving the European Union also presents huge challenges because of the need to preserve an open border between Ireland (an EU member state) and Northern Ireland (part of the United Kingdom), and because of calls for independence in Scotland, which voted by a clear margin against Brexit in the 2016 referendum.
“I think Brexit is practically impossible because the old borders will be shaky and the UK has a Northern Ireland issue and a Scotland issue,” Yanai told CNN Business. “Therefore, I think Brexit is difficult to realize even if the UK wants to do it.”
“If Brexit does happen, the UK could revert back to the former situation before the Margaret Thatcher era, when the UK was referred to as the sick man of Europe. I’m afraid that could happen again.”
Former Prime Minister Thatcher won her first election in 1979 following years of low growth, high inflation and unemployment in the UK economy. In the 1980s, encouraged by Thatcher, Japanese companies began to view Britain as their gateway to Europe and they invested heavily in auto assembly plants, banking and other businesses.
Fast Retailing, the global clothing empire which owns Uniqlo, opened its first store outside Japan in London 18 years ago. Since then, it has expanded into every major market around the world. Fast Retailing recorded sales of 2.13 trillion yen ($19.2 billion) in 2018, and Yanai is worth around $30 billion, according to Bloomberg.
His warnings about Brexit echo fears expressed by other Japanese executives about the United Kingdom’s future relationship with the European Union, and the country’s preparedness to exit the bloc by October 31.
If Britain leaves without an agreement to protect trade, tariffs and other barriers will be imposed on UK-produced goods entering the EU market, including cars manufactured by Japanese-owned companies.
Nissan (NSANF), Toyota (TM) and Honda (HMC) together produce about half of the cars manufactured in the United Kingdom, and most of the finished products are sold in Europe. They are already scaling back their presence in Britain because of a slump in sales and uncertainty over the country’s future relationship with its biggest and nearest trading partner.
Honda has announced that it will close its Swindon factory in 2022 and Nissan has abandoned plans to build its X-Trail model in the northern city of Sunderland. Nissan is also moving production of other luxury cars out of the country.
Earlier this month, Toyota said that it is planning to pause production at its factory in Derbyshire on November 1 in anticipation of possible disruption at UK ports that could affect the supply of parts.
As for Uniqlo, Yanai said his company remains committed to maintaining a presence in the United Kingdom in the long term, despite the economic and political challenges ahead.
He also spoke about his ambition to transform the company into a global leader when it comes to dealing with the climate crisis.
“Environmental issues are the most important current issue in the business world,” he said. “And unless we can solve this issue, there is no meaning to run the business,” he added.
Asked whether it was possible for Fast Retailing to achieve net zero carbon emissions, Yanai said: “I believe that should be doable in the future. And we have to do it in a hurry. Otherwise, the environment on earth is [in] imminent danger.”
Yanai, 70, has begun talking about his successor, saying he wants a woman to take his place.
“Female leaders tend to be more talented individuals, female leaders are better suited to do apparel retail business, and I expect to see more female leaders in business management,” he told CNN Business. Women have a better ability to adapt when getting into the global market.”