Editor’s note: Approximately six hours after this article was published, European leaders announced an agreement with the UK to delay Brexit until mid-April or May.
The uncertainty surrounding the rapidly approaching March 29 deadline for Brexit, the United Kingdom’s exit from the European Union, has already led to changes in the way European business is conducted. Many European companies based in the UK are relocating their headquarters to ensure business continues as usual. One major destination of these “Brexit refugees”
In 2018, 153 foreign companies moved to the Dutch city, bringing 7,200 new jobs. The city government estimates another 2,000 jobs will be added to the local economy over the next three years as a direct result of Brexit. The Netherlands Foreign Investment Agency is in talks with another 250 foreign firms about relocation. Some big brands that have already relocated or announced plans to relocate as a result of Brexit include the European Medicines Agency, Japanese electronics giant Sony’s European branch, and Discovery Channel’s European operations.
Because of the influx of foreign firms, the Netherlands is poised to become the financial center of the post-Brexit European Union, a position the UK – specifically London – currently holds. In the event of a no-deal Brexit, which is becoming increasingly likely, EU businesses and consumers would be severed from securities trading and other cross-border services based in the UK. To prepare for that event, the EU financial market is migrating – financial trading infrastructure is moving to the Netherlands, banks are moving to Frankfurt and Paris, and portfolio managers are moving to Luxembourg and Dublin. The Netherlands will host between 30 to 40 percent of European financial trading, an increase from the current 5 percent. Nearly 90 percent of future bond trading will likely take place on Dutch soil.
Brexit refugees are not just businesses. Ten thousand foreign migrants moved to Amsterdam in 2018, pushing housing prices to record highs. What sets the Netherlands apart from other EU states? If the Netherlands is poised to reap so many benefits from Brexit, does the country stand anything to lose from the move?
Rising from the sea of adversity
The Dutch are accustomed to finding opportunity in the bleakest of circumstances – two-thirds of their country is land reclaimed from the sea. When Theresa May invoked Article 50 in March 2017, the Dutch government began preparing for the “chaos scenario” of a no-deal Brexit. The Dutch launched a systematic campaign to prepare both the government and Dutch businesses. The government hired 1,000 new customs officers, launched an informational campaign for Dutch firms starring a “big blue Brexit monster,” and created a website so Dutch companies can analyze how Brexit will affect their bottom line.
The government also saw the opportunity to attract foreign firms. The Netherlands was ranked first by the EF English Proficiency Index, which measures English proficiency outside the Anglosphere. This made it especially easy for Amsterdam’s Deputy Mayor Udo Kock to highlight why the Dutch capital was an attractive destination for companies leaving the United Kingdom. Officials continue to emphasize Amsterdam’s high quality of life and favorable business atmosphere. To attract financial activity even further, the Dutch Authority for the Financial Markets (AFM) has called for increased investment “in extra capacity, knowledge, and support services, such as the processing of transaction data.” The AFM was granted a 10 percent boost in their funding by the government in February to prepare.
The Brexit Monster’s true impact
Even though the Netherlands is one of the best-prepared EU states, a no-deal Brexit will harm the country. According to the Dutch Court of Audit, Brexit will cost the Dutch €2.3 billion through 2023 because of increased barriers to trade. The British are currently the third-largest trading partner of the Dutch, lagging behind neighbors Belgium and Germany. A little over 200,000 Dutch jobs depend on exports to the United Kingdom. The Dutch will also be required to increase their EU budget contribution to compensate for the lost British contribution.
In a long-run analysis, the Dutch Economic Policy Analysis Bureau forecasted the trade lost as a result of Brexit will cost €10 billion, or 1.2 percent of the Netherlands’ annual GDP, by 2030. The loss in trade could also lead to a decrease in innovation, the true costs of which cannot be measured.
The Dutch agricultural sector stands to be the biggest loser from a no-deal Brexit. The Aalsmeer flower auction, the world’s biggest flower market, sent 13 percent of its exports to the UK in 2016. Fifteen percent of Dutch exports of processed fruit and vegetables went to Britain. These perishable goods depend on the EU’s open and free trade, but a no-deal Brexit would be subject the goods to tariffs, inspections, and customs checks, raising the cost of agricultural trade and complicating the export process by increasing the need for and use of preservatives.
The Dutch provide a key example of the monumental economic effects Brexit will have on the EU as a whole. Despite preparations beginning the same day as Prime Minister Theresa May’s invocation of Article 50 in 2017, the Netherlands will be suffer from Brexit. For states not as prepared for Brexit, such as Poland and their nearly $9 billion trade surplus with the UK, the resulting economic and political effects pose a massive challenge.