Why are design giants like Dyson moving abroad in time for Brexit?

Update 18 February 2019: Car company Ford is the latest manufacturing giant to allude to opening production plants abroad in the case of a no-deal Brexit. The claims were reported on by The Times and were allegedly made by Ford directly to prime minister, Theresa May. Read more about it here.

Over the last few days, several technology titans have announced plans to move their headquarters from the UK to Europe and beyond.

Many of the revelations come as the UK staggers towards the possibility of a no-deal Brexit; as the prime minister’s deal was rejected last week, amendments are currently under way, but the prospect of the UK leaving the European Union without a deal in place is on the cards.

This could affect businesses in multiple ways, from EU citizens’ rights to remain in the UK and vice-versa potentially disappearing, and an increase in tariffs imposed on goods and services that the UK exports to the EU and vice-versa, given there would be no official trade deal in place.

Dyson, best known for its range of vacuum cleaners, contentiously announced this week it would be moving its HQ from Wiltshire to Singapore; a step, which the company’s CEO Jim Rowan, has allegedly said has “nothing to do with Brexit” but is instead about “future-proofing” the business.

Dyson a Brexit advocate

Given founder James Dyson’s openly pro-Brexit stance, the move is seen by some as a contentious one, regardless of Rowan’s assertions. Spokespeople such as Liberal Democrat MP Layla Moran told the Guardian that the move suggests “staggering hypocrisy” from inventor Dyson, who has previously spoken about how leaving the EU could have a positive impact on UK business.

Japanese electronics giant Sony has also announced this week it will move its European HQ from the UK to the Netherlands, and has allegedly put its reasoning down to disruption caused by Brexit, with a Sony spokesperson telling the BBC that the move will make Sony a “company based in the EU”, avoiding difficult customs and trade procedures.

These are not the first major players to panic about how Brexit might affect their business – last August, Sony rival Panasonic also announced it would move its European HQ from the UK to the Netherlands as a result of tax issues that could arise when the UK leaves the EU.

Moving to Singapore a “logical business decision”

It seems, as the likelihood of a no-deal increases, international-looking companies are hedging their bets on relocating in a bid to avoid charges and complications, both in terms of movement of people and goods.

Design industry professionals view these relocation decisions differently. Jack Tindale, design and innovation policy manager at not-for-profit Policy Connect, says that Dyson’s controversial move could well be a “perfectly logical business decision” that has been timed haphazardly.

“Ultimately, what may be motivated by Singapore’s lower corporation tax rate and proximity to new markets will be seen as umbilically linked and conflated with the Brexit process,” he says. “HQ moves are often based around desires to reduce tax burdens for accounting purposes.”

But he adds that the outright decision to move because of Brexit, as has been made clear by brands such as Sony and Panasonic, could ultimately still have an impact on the UK’s product design industry, which has until this point had a good reputation internationally. He adds that, up until this point, the UK has been seen by Asia-based companies as a good bridge, offering access to both UK markets and European markets.

UK has been a bridge to European markets

“We should not downplay the potential that decisions such as this could have for the UK’s design sector and creative industries,” he says. “Firms like Sony and Panasonic based themselves in Britain, owing to our national reputation as a foothold into Europe.

“It’s not surprising that international firms have decided to implement their no-deal contingency plans. The risk to the UK is reputation, as [a no-deal] hardly sets out a sign of the UK being a good place to do business.”

He says that there are additional dangers of a no-deal in that it will be more difficult to attract “the best possible European [design] talent” given uncertainty over EU citizens’ rights to stay, as well as daunting prospects of keeping up good trade relations, given that transferring “more than 40 trade deals” that currently exist between the UK and various countries thanks to EU membership, will be “challenging”.

He adds that, despite Dyson’s assertion that the company move is nothing to do with Brexit, a free trade deal was drawn up between the EU and Singapore in October last year, suggesting that despite the CEO’s assertions, moving the HQ to this country could possibly make trade with Europe simpler than remaining in the UK.

Jon Marshall, partner at consultancy Pentagram and a product and industrial designer, says that tech companies such as Panasonic, Sony and Dyson moving their HQs out of the UK is “very concerning”, given that other parts of their businesses, such as research and development (R&D) departments, could follow suit, which could create “friction” between UK design studios and their clients based in other countries.

“Brands like Sony and Panasonic have UK design teams, and work with UK design consultancies to develop products for the EU market,” he says. “With the relocation of their HQs, my fear is that other functions could follow and create distance between key decision makers and designers.

“Our creative industries trade globally and can adapt, but any increased friction with movement of goods and services, intellectual property (IP) protection, finance, travel and staffing will impact our ability to work in an agile way with our clients.”

UK is “the most creative hub on the planet”

Other industry leaders believe that large design-led companies moving their HQs out of the UK may not harm the overall reputation of the design industry, which is seen to be “one of, if not the, most creative hubs on the planet”, according to Adam Fennelow, head of services at the Design Business Association (DBA).

“It’s difficult to assess the long-term implications on the UK design sector of large businesses moving their HQs out of the UK,” he says. “While it might change tax liabilities and access to markets, the impact on the sector may be minimal.

“Businesses around the world look to the UK as an ideal place to locate their design teams, as we have creative talent, coupled with commercial knowledge.”

No-deal would be “catastrophic” for creatives

However, Alan Bishop, CEO at the Creative Industries Federation, thinks that companies moving signals “catastrophic consequences” for the UK’s design sector. He adds that the impact will not only be felt in terms of “economic value and potential loss of jobs” but in that it will harm connections and relationships between businesses and creative individuals.

Research conducted by the Creative Industries Federation last year also shows that the desire for large, design-led companies to move is perhaps not that surprising.

The Global Trade Report found that nearly half — 40% — of the UK’s creative industries said that a no-deal scenario would harm their business’ ability to export while a fifth – 21% – said that in the event of a no-deal, they would consider moving all or part of their business abroad.

“Ease of movement and trade vital”

“Steps must be taken to avoid the outcome of a no-deal Brexit, which would be hugely damaging for creative individuals and enterprises, as well as the UK on a whole,” Bishop says. “Ease of movement and frictionless trade of services are absolutely vital across the creative industries.

“The sector accounts for almost 10% of the UK’s total services exports so disruption to this will have a major negative impact not only on individual businesses but on the wider prosperity of the UK,” he adds.

The Brexit withdrawal agreement is currently being amended, after prime minister Theresa May’s initial plan was rejected on 15 January. MPs are currently suggesting amendments to the plan. May’s revised plan will go to an MP vote next Tuesday 29 January. If the deal gets rejected again, possibilities include a no-deal Brexit or a delayed Brexit, as well as other potentials, such as a second referendum.