Earth-movers halted by high pound

Komatsu may not be the most famous of Japanese firms but, in its unglamorous way, it has done its bit for Britain.

Komatsu may not be the most famous of Japanese firms but, in its unglamorous way, it has done its bit for Britain.

The company makes earth movers, the metal leviathans found on building sites all over the world, and in 1985 - towards the peak of Tokyo's boom but well ahead of many Japanese investors - Komatsu opened a manufacturing plant in Birtley, Co Durham, where 600 workers build hydraulic excavators.

These days, the plant is working at almost full capacity and, in normal circumstances, Komatsu would be planning to expand the operation, with benefits all round.

The company would then be able to meet the rising demand for its steel monsters and the people of Birtley would benefit from the hundreds of new jobs that would be created. But that will not be happening. "If we saw the possibility of Britain joining the euro we might make a new investment, but in the present circumstances we can't think of that," says Hideto Echigo, of Komatsu's Tokyo headquarters.

"The problem is the high pound. As a company, we've cut our costs by 3 to 5 per cent - but it doesn't cover the increase in the pound. It's beyond our control, and making a new investment is just too risky."

Fewer than a fifth of the hydraulic diggers are sold in Britain. Most go to Europe. Komatsu buys many of its parts and pays its workers in expensive sterling - but is paid by its customers in European currencies pegged to the much weaker euro. If the firm set up a new plant in euroland (it has two factories in Germany and one in Italy), the complications of exchange rate fluctuations and currency conversion charges would be a thing of the past.

"I think the situation is the same for other Japanese companies manufacturing in Britain," says Mr Echigo. This is the fear articulated by Sir Stephen Gomersall, Britain's ambassador to Japan.

After all the hard work done by successive governments - the diplomatic lobbying, grassroots promotion campaigns and tax incentives - Japanese investment into Britain risks being scuppered by Tony Blair's reluctance to commit unequivocally to the euro.

As well as Komatsu, the ambassador's leaked memo mentions companies from the Nissan and Toshiba to Japan Tobacco and Nippon Sanso Thermos Flasks whose British operations are reckoned to be suffering from euro-lag.

Britain does well out of Japanese manufacturers. In 1999, says the Japan External Trade Organisation, 1.3 trillion yen worth of new projects were set up in Britain last year - 17.6 per cent of Japan's overseas direct investment. For many companies, Britain is the natural first choice for a European operation, for reasons economic, cultural and sentimental.

"Sweeping generalisations about the euro are misleading," says Kazuyuki Kimbara, of the Keidanren, Japan's equivalent of the CBI. "There are other factors which make Britain attractive: the openness of the business environment, deregulation, lower wages and a good quality of workers."

Surprisingly, English is the foreign tongue Japanese are most likely to know. Many speak of an emotional affinity with Britain which does not extend towards France and Germany, an identification with the inhabitants of another island nation of tea drinkers on the edge of a continent with which they have sometimes difficult relations.

But such considerations are giving way to the bottom line - that the single open European market which the EU has promised to international investors is less straightforward in Britain than in the euro-zone.

"These companies aren't interested in domestic political disputes, they're interested in profit," says Mr Kimbara. "And in the UK, some of them are losing money."

world cup 2014A history of the third-place play-offs
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Yaya Touré has defended his posturing over his future at Manchester City
Detail of the dress made entirely of loom bands
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice