On the eve of this year's G20 Summit, Japanese ambassador to London, Koji Tsuruoka, issued a cutting warning to Prime Minister Teresa May: negotiate a soft departure from the EU or risk Japanese businesses and financial institutions relocating their operations elsewhere. A memo, published on the Japanese Foreign Ministry's website, cited numerous Brexit concerns and warned Britain that if it relinquishes its tariff-free access to the single market and 'banking passport', Britain should expect an outflow of Japanese investment with the most significant blows falling on the finance and pharmaceutical industries.
But will these threats materialise? Many of the concerns over the impact on foreign investment from Britain's exiting from the European Union are grounded on the presumption that the EU will impose oppressive trade-tariffs on UK firms, but one much more immediate consequence of the vote is a depressed pound, making deals cheaper for the overseas contingent. Times of previous sterling weakness have shown us that foreign investors are alive to the opportunities during these times and, encouragingly, that such higher levels of opportunistic investment continued for the period of the weak pound.
The question is whether the cost saving is enough to overcome the uncertainty surrounding Britain during the Brexit years. Britain continues to offer a platter of trade-enticing benefits such as strong rule of law, well-developed transport infrastructure and a (relatively) stable political environment. A report by Capital Economics published by fund manager Neil Woodford dismissed economic concerns over Brexit as being 'overblown' and noted that whilst direct investment in the UK from Member States may decline, Britain remains highly successful in attracting inward foreign direct investment.
We will not know for certain whether Britain's exiting of the European Union will have a positive or negative effect on investment until nearer to our predicted exit date of March 2019. The impact will ultimately depend on what type of Brexit is negotiated and continued uncertainty as to the status of Britain's exit from the EU will remain a major concern for foreign investors. What is clear for the moment is that foreign investors could be well placed, and keen, to take advantage of the bargains currently on offer.