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Japanese drugmaker moves European HQ from London over Brexit

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Japanese drugmaker moves European HQ from London over Brexit

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London fights for its future

Japanese drugmaker moves European HQ from London over Brexit

Shionogi feted by Boris Johnson when it opened UK base in 2012

Boris Johnson had said Shionogi would be a fantastic addition to London’s growing life sciences sector © AFP

A Japanese pharmaceutical company that based its European headquarters in London five years ago and was praised for doing so by then London mayor Boris Johnson, is now planning to move the base to the Netherlands in preparation for Brexit.

Shionogi’s planned move makes it the latest in a string of Japanese companies — including Panasonic and Sony — looking to restructure their European operations to insulate themselves from disruption caused by Britain’s departure from the EU. 

Shionogi’s plans involve merging its UK-based operation with a Dutch subsidiary, according to people briefed on the matter. The change is not expected to create significant movements of staff, but will see the substantial financial dividends of Shionogi’s European operations bypassing London in favour of the new headquarters. The company declined to comment.

The shift followed signs that the Japanese tax authorities will treat such moves as domestic mergers rather than cross-border deals, in a move that will lower the tax liability for the company.

That could trigger a further rush of Japanese company moves in coming weeks, the tax experts added. The Netherlands Foreign Investment Agency said in January that more than 250 companies were in discussions about Brexit-driven relocations.

Most of those Japanese companies moving headquarters were convinced to invest in the UK on the promise that it would be a stable, legally predictable gateway to Europe, with many basing themselves in the UK for decades.

Shionogi, however, was a relatively recent and enthusiastic arrival. The drugmaker said in the 2012 announcement of its new London base, that the office would “form a new era for the company as it expands its global business into Europe”. It added London was chosen because of its infrastructure, talent pool and easy access to Europe after an extensive review of potential locations across the continent.

In an effort to highlight the importance of Shionogi’s choice, Boris Johnson, then mayor of London, added his voice to the company’s announcement. The politician, who later became a leading voice in the campaign for the UK to leave the EU, said that Shionogi would benefit from “direct access to huge markets”, would be a “fantastic addition to London’s growing life sciences sector” and that his own plan to boost jobs and growth was underpinned by attracting ever more companies to the UK capital.

Mr Johnson did not comment on Shionogi’s plans to move. 

Rajesh Agrawal, London’s deputy mayor for business, said Shionogi’s decision was further evidence that the government’s approach to Brexit was creating uncertainty. “In particular, the lack of firm proposals on how to protect services — which account for 92 per cent of London’s economy — is a major failure on the government’s behalf,” he said, adding that London was “always reinventing itself” and would continue to thrive in the long term.

Although Japanese companies have long seen such mergers as a neat solution to Brexit uncertainty, many have been hesitant because of the uncertainty about how Japanese tax authorities would view such arrangements.

Within the past two weeks, say tax experts, they have indicated that they may treat such pre-Brexit cross-border deals as “tax-qualified”, prompting Shionogi to advance its plans.

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