Impact of Brexit on the UK & the Dutch Alternative


Without a doubt, the shockwaves of the inevitable exit of the United Kingdom from the European Union will be felt in Europe and abroad alike. To better understand what lies ahead, it is important to comprehend the present business relationship between the UK and the EU. The EU exercises many economic policies for its member states, such as the standardization of laws and regulations and negotiating trade deals with external nations as a bloc. Most importantly, the EU embodies what it calls the Single Market. This defines the EU as one territory without any internal borders or other regulatory obstacles to the free movement of goods, services, capital, and persons, in the aim of stimulating competition and trade, further improving efficiency, raising quality, and cutting consumer prices.[1] Indeed, it is apparent that these policies have improved the economies of EU member states, including that of the United Kingdom.

 

The UK has arguably become the financial hub of the world, being, in fact, the largest trading center for EU related assets.[1] This is because London has built an incredible inventory of high-skilled labour and knowledge centers and has enjoyed unhindered access to the European Union’s Single Market and Passporting rights. Passporting rights, according to the Bank of England, authorize a firm in an EEA (EU) state which complies with the Single Market objective to carry on permitted activities in any other EEA (EU) state by either exercising the right of establishment or providing cross-border services. Looking at Figure 2 from S&P Capital IQ, one can easily see how much Passporting rights have benefitted the UK economy, having created an enormous trade surplus in services, particularly financial ones.

 

However, this is all about to change. Leaving the European Union means that the UK will almost certainly lose access to the EU Single Market and all of its benefits. Without the continued jurisdiction of stand-ardized EU regulations and laws within the UK, economic confidence in and general ability to trade with the United Kingdom may very well be diminished. Overall, given the complex situation faced by the UK and EU, it is unlikely the two parties will have a proper trade deal in place before the two year negotiation period under Article 50 ends. Understanding this, the majority of firms who operate between the UK and EU fear that the Brexit will indeed damage trade and therefore be detrimental to their business activities.[2] It would be wise of any firm affected by the Brexit to consider its options and avoid potential future problems. This is the reality facing many businesses in the UK today.

 

Still, in the world of business, often one’s loss is another’s gain. As firms decide whether to move, a collection of EU member states are beginning to court enterprises to bring them to their cities. One country of interest is the Netherlands. First and foremost, the Netherlands is and will remain a full member of the EU, a popular notion strongly demonstrated by the recent general election which secured a strong victory for the Pro-EU center right political party VVD. This means the Netherlands holds and will continue to hold all of the benefits of the EU, including Single Market access, Passporting rights, and EU Law standardization. More specifically, to further understand why the Netherlands is so attractive for foreign investment, we will consider the following factors relating to FDI: Market Size, Wage Rates, Labour Skills, Tax Rates, Transport & Infrastructure, Political Stability, Free Trade Zone Access, Clustering Effects, Competitiveness, and Language Skills. As one can see, the Netherlands boasts a noticeably competitive position in Europe. For any business considering relocation into the European Union, The Netherlands diligently presents itself as a serious candidate.

 

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For inquiries regarding relocation to the Netherlands, feel free to contact us at East-West Trade & consulting. We hold years of experience in market penetration and business establishment in the Netherlands and are ready to help you with your specific needs.

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[1] See Figure 1 from TheCityUK; (Global Council, 2015)

[2] See Figure 3 from CBI/YouGov.

[3] See Figure 3 from CBI/YouGov.