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Toyota comment no reason for Brexiteers to crow

by Sam Ashworth-Hayes | 25.01.2016

Today’s front-page Financial Times headline “Toyota pledges to stay in UK even if country takes Brexit”  is being viewed as a boost to eurosceptics. It has been interpreted as meaning that the Japanese car giant doesn’t care about whether Britain stays in the EU and that its investment in the country would not change if we quit.

But this isn’t the case. Not only does the FT report fail to contain any direct quote from Toyota about Brexit; the car giant told InFacts that single market access is “crucial” to its success in the UK. Its chairman, Akio Toyoda, also hinted in his FT interview that Brexit could result in less investment in Britain.

Although the FT doesn’t quote Toyoda talking about Brexit, he said his predecessors buried a time capsule at the Toyota plant in Burnaston, Derby, 25 years ago. He is quoted as saying: “We want to deepen our roots to deliver ever better cars, so when that capsule is opened after 100 years, all can see we’ve built a truly British company.”

Toyota’s UK press office told InFacts that Toyoda’s statement was a general commitment to the UK market, not a specific statement about a potential Brexit.

Toyota also repeated a line it has taken since 2014: “Open access to the European single market has been and remains crucial to our business success…. Around 75 percent of our products made in the UK are exported to EU countries.”

It’s easy to understand why access to the single market is so important. If Britain quit the EU and didn’t cut some special deal with the bloc, UK car exports would face a 10 percent tariff.

This does not, of course, mean Toyota would then uproot its two UK factories – as well as the car plant in Derby, there’s an engine one in Wales – and cart them off to the EU. It has already sunk over £2.2 billion into these operations, as well as invested lots of time and money training its 3,400 staff. It couldn’t shift the kit and employees lock, stock and barrel. Meanwhile, shutting the factories would crystallise a big loss.

However, Brexit could mean Toyota is less keen to invest in expanding the UK operations. After all, it already has many other factories in the rest of Europe it could beef up: in France, Poland, Portugal, the Czech Republic and Turkey, which has a customs union with the EU though it is not part of it. Indeed, Toyoda hinted this in his FT interview, saying that “in the sense that investment equals capacity, then various things come into it, like the size of the market”.

Brexit wouldn’t be enough to shut down Toyota’s UK operations. But, if it resulted in tariff barriers, it would both harm the car giant and Britain.

This article was previously published on 12 Jan. 2016 on hugo-dixon.com

Edited by Hugo Dixon