Dyson, one of the UK’s last true brand icons, is moving its headquarters to Singapore. What does this mean for the future of UK industry and FDI post-Brexit? John Kennedy investigates.
Signals from the World Economic Forum at Davos and the news of Sony and Dyson’s decision to move their headquarters to the Netherlands and Singapore respectively indicate that the future of foreign direct investment (FDI) is going to be a lot less predictable.
We’ve been used to banks and hedge funds slinking away to safer harbours as the calamity that Brexit portends gives them and their investors indigestion, but are we now witnessing the start of electronics and digital brands drifting away from the UK?
‘With the rise of trade tension and protectionism, it stands to reason that confidence is waning’
– BOB MORITZ
Japanese electronics giant Sony yesterday (22 January) announced it will shift its European headquarters from Britain to the Netherlands to avoid Brexit-related customs issues. It will now be a company based in the EU so that the region’s common customs procedures will apply to Sony’s European operations after the UK relinquishes its membership.
That makes a lot of financial sense for a mass electronics goods producer such as Sony and it will be interesting to see if other UK-headquartered giants do the same. Last year Panasonic also announced plans to move its European headquarters to the Netherlands due to concerns about Brexit.
But the real jaw-dropping moment occurred when Dyson, the maker of vacuum cleaners and hairdryers and more, also announced yesterday that it too was upping sticks and moving its headquarters to Singapore. Insisting it was not because of Brexit – founder Sir James Dyson is apparently an ardent Brexiteer – the company said that Asia was now the main focus of its activities and that it wishes to be regarded as a “global technology company”.
The move, which could cost the UK £60m in lost corporation tax, raises serious questions about the future of British industry for one thing. Think about it, to my eyes anyway, Dyson represented the last hurrah for globally renowned British brands in the engineering tradition of Rolls-Royce, Bentley, Hotpoint, Jaguar and BSA Motorcycles. Dyson took the seemingly mundane area of vacuum cleaners and made them as sexy as Apple’s iPhone, if you could call electronics sexy. It even plans to build an electric car using its cyclone engine technology.
It is deeply worrying for the UK that one of its premium brands and technology outliers is moving to Asia, and it signals the importance of that region for the future of technology. London is still one of the largest destinations in Europe for venture capital and it has a thriving start-up scene. But still, Dyson represents the ultimate UK start-up, and if it doesn’t see a future for itself in the UK then what kind of a signal does that send to emerging founders?
Ultimate toff, Conservative MP and arch-Brexiteer Jacob Rees-Mogg actually defended the move with the words: “It is a reminder that we need to be globally competitive rather than narrowly focusing in the EU.”
While it is hard to take anything that Rees-Mogg says seriously – he has been lampooned for his pro-Brexit stance and making Britain great again while shifting two of his own investment funds to Ireland – he actually makes a very prescient point because whatever happens post-Brexit, the battlefield for the location of global headquarters and business operations will be a lot more severe and nuanced.
Ireland, tectonics and technology
Ireland has actually done well out of Brexit so far, and IDA Ireland’s recent annual report showed that Brexit has created more than 4,500 jobs in Ireland so far as 55 firms were approved for investment. Firms such as Morgan Stanley, Bank of America Merrill Lynch and Barclays are among those that declared a new or expanded presence for Ireland in 2018, as the Brexit fallout continues to accumulate.
But even still, Ireland has to tread very carefully.
Signals from Davos are that the global appetite for investment and indeed the battlefield for FDI is being rocked to its very core by the uncertainties of Brexit and the US trade war with China.
From a technology perspective, the tectonic plates of innovation are shifting from Silicon Valley to Asia, and a hornet’s nest has been kicked over security based on Chinese tech companies’ loyalty to the party state. It has become a political football and the arrest of Huawei CFO Meng Wanzhou has made her a poster child for the deepening crisis.
At Davos, consulting giant PwC’s survey of CEOs present at the global summit found that nearly 30pc of business leaders believe global economic growth will decline in the next 12 months, approximately six times the level of 5pc last year – which it describes as a record jump in pessimism. “With the rise of trade tension and protectionism, it stands to reason that confidence is waning,” said PwC global chair Bob Moritz.
IDA Ireland CEO Martin Shanahan was quoted in The Irish Times yesterday as saying: “There is a possibility that FDI globally will decline this year, and if that is the case we are going to have to work harder to maintain the level of investment that we’re currently getting into Ireland.”
Shanahan is not mincing his words. Despite the brilliant 1,500-job investment for Salesforce Tower in Dublin last week, the 1,000 jobs at Facebook this week and the fact that Google now employs about 8,000 people in Dublin, and of course the 4,500-job Brexit windfall, the FDI battlefield is shifting along with economic tectonic plates.
Remember, IDA Ireland is ultimately a sales organisation, and Ireland, its people and its infrastructure are the product that it sells. Everyone and everything must be at the top of their game.
We are heading into an uncertain world and the battlefield for FDI will be more nuanced than before. Our competitors are both near and far away.
Post-Brexit, the UK will be prepared to do whatever it takes to shore up its economy. Locations such as the Netherlands and Singapore will be just as competitive for Ireland to do battle with for FDI.
It will be a case of tread carefully, but be ready for anything.