Investment in jeopardy

Leading Far East companies are warning that the increasingly isolationist British stance on Europe over the BSE crisis could jeopardise further investment in the UK.

"Distribution is an important factor in the location of any manufacturing site, and the UK's relationship with mainland Europe may have a direct bearing on the extent of investment," cautioned Seigo Nishino, deputy chairman of Mitsubishi Electric.

Since coming to Britain in 1978, Mitsubishi Electric has invested pounds 75m in four factories producing colour televisions, video recorders and computers. More than half its output goes to other European Union countries.

Mitsubishi is just one of 215 Japanese companies that have set up in Britain to gain access to the EU market. The UK has been the number one choice, scooping 40 per cent of Japanese investment in the EU.

Electronics giant Fujitsu earmarked pounds 816m to expand its Newton Aycliffe plant in County Durham last September. "If the UK were to pull out of the EU that would have serious implications for a factory like this," said a spokesman. He added it would certainly put "a question mark" over further investment.

"All our production is exported with 95 per cent going to mainland Europe. We compete with non-EU located businesses to supply Drams (computer memory chips) in Europe," he said.

"If that market became difficult, the EU would erect tariff barriers. We would then be less competitive than we are now. Fujitsu would have to look seriously at any further investment if we were unable to compete."

A Nissan spokesman said: "If the EU changed the rules of engagement then this would become a problem Nissan would have to address." It is currently spending pounds 250m on converting an assembly line to build the new Primera car, and its UK investment has topped pounds 1.25bn.

Electronics giant Sony, which makes TVs and computer monitors from large plants in South Wales, sees any change to Britain's stance on Europe as "one of the criteria considered when looking at future investment". Some 85 per cent of its output is exported to other EU countries.

Other Far East-based corporate giants are thought to be concerned about UK investment plans. Two South Korean electronics companies, Lucky Goldstar and Daewoo Electronics, are thought to have put UK expansion plans on ice recently in case the beef crisis leads to a deeper rift between Britain and its EU partners.

Inward investment into the UK has been important for jobs. The Confederation of British Industry estimates that, since 1979, 700,000 jobs have been created as a result of direct investment by overseas companies.