The Dutch Economy and the Brexit

The UK and the Brexit
2 de maio de 2017
Outlook of Switzerland
3 de maio de 2017

The Dutch Economy and the Brexit


In 2016, the Netherlands had a GDP of $865.9 billion with a real growth rate of 1.7%, making it the sixth-largest economy of the European Union (CIA Factbook, 2016). The country’s economy is mostly composed of third sector activities, with the services sector accounting for 70.4% of it. The industry sector and the agricultural sector respectively account for 17.8% and 1.8% of the Dutch GDP. However, it is important to notice that the highly automatized agricultural sector makes the country the second largest agricultural exporter in the world (CIA, 2016). The country’s labour force in 2016 was of 7.919 million, with an unemployment rate of 6.2%, down from 6.9% in 2015. The main export partners of the Netherlands are Germany (24.5%), Belgium (11.1%) and the UK (9.3%), and the main import partners are: Germany (14.7%), China (14.5%) and Belgium (8.2%) (CIA, 2016). The financial sector of the Netherlands is dominated by four major banks (ING Group, Rabobank, ABN AMRO, and De Volksbank (previously SNS Bank)), which own 90% of the banking assets. Although these banks have largely suffered during the global financial crisis, they are now considered by the European Banking Authority to be well-capitalised (CIA Factbook, 2016).
As member state of the European Union, the country benefits from no import restrictions and no tariffs with its partners from the EU. Nevertheless, the UK, one of the main business partner of the Netherlands, will now quit the EU. Will this decision impact the Netherlands’s economy? If yes, will this have positive or negative consequences? These questions will be briefly discussed in this paper.

A Negative Outlook:

First of all, a study by Reuters points out that the Brexit could reduce the Dutch economy by 1.2% by 2030. According to the Netherlands Bureau for Economic Policy Analysis (CPB), “the Dutch economy is more connected to the economy of the United Kingdom (UK) via trade than to that of the European Union (EU) as a whole”. With a departure from the UK, the Netherlands will therefore be exposed to a substantial trade gap. Although the exact size of the gap is not known, we can however assuredly affirm that uncertainty will grow for the Dutch exporters. Among the worst-hit sectors will be: chemicals, plastics and rubbers, electronic equipment, and the food processing industry, which could suffer from production losses of about 5%. (Reuters, 2016). The fishing and farming industries could also be greatly impacted by the Brexit. In fact, a hard Brexit could mean that the Dutch fishermen no longer have access to UK waters, thus drastically reducing their fishing opportunities. Moreover, a hard Brexit would greatly decrease the agricultural trade between the Netherlands and the UK, injuring both countries economically (Dutch News, 2017). There is a risk of new tariffs being imposed when trading with the UK and also a risk of the UK creating import restrictions. This should negatively impact the trade balance of the Netherlands and its real GDP growth rate for the years to come, unless the UK manages the renegotiations of trade agreements with the EU successfully. However, there is an important chance that EU officials want to make an example from the UK, consequently imposing severe and strict trade agreements, which would make trade between the Netherlands and the UK very difficult and costly.
Moreover, the Netherlands will be the most negatively impacted country of the EU by the Brexit according to the Global Counsel 2015 report (see appendix 1). In fact, the Global Counsel mentions that “Dutch firms have direct investments worth €177 billion in the UK, earning over €9 billion in 2013, equivalent to almost 1.5% of the Dutch GDP” (ONS, IMF WEO, GC calculations). Added to this, the Netherlands exported €7 billion in services and €42 billion in goods, creating a surplus of €6.8 billion. (Global Counsel, 2015). It is also important to mention that some of the Netherlands’ largest companies are well established in the UK, such as Unilever, Shell or Phillips. The Brexit may mean a delocalization of these headquarters to another country. And finally, the report points out that the Netherlands has bank loans from Britain adding up to €236 billion in 2014, hence showing again the dependence of the Dutch economy on the UK.
The loss of such an ally that the UK was will have dramatic consequences on the Dutch exports and its finance industry, naturally impacting the Dutch growth. The question which needs to be raised now is: for how long will the Netherlands suffer from the Brexit?
It should also be mentioned that the Netherlands will be indirectly affected by the EU’s loss due to the growing tensions and uncertainty within the European Union itself. The exit of the UK opens the possibility for more member state exits in the coming years (Reuters, 2016). In fact, the French elections will take place in only a few days, bringing in more uncertainty in the political and economic landscape. This increased uncertainty could negatively affect foreign direct investment flows within the EU, affecting vicariously the Netherlands itself.

Financial Reactions:

When considering the Brexit, financial aspects are paramount for member states of the European Union. The day after the Brexit referendum, the FTSE fell by more than 8% and the pound plummeted to a 31-year low. Stocks in the United States also reacted negatively after the announcement, with the Dow Jones falling by almost 3% in the following hours (The Guardian, 2016). As for the main European stock markets, they also reacted negatively, with the DAX falling by 6.8%, and the CAC 40 losing almost 8% (Chicago Tribune, 2016). The AEX (Amsterdam’s stock exchange) was also greatly impacted, losing almost 7% of its value after the announcement (Bloomberg, 2017). These numbers show how much some of the main stock exchanges were negatively impacted by the news of the Brexit.
As previously mentioned, the Dutch and British economy are greatly related in various aspects. Hence, a more detailed comparison between the AEX and the FTSE will be conducted. First of all, it is relevant to see that, although the British index has been above the Dutch one for almost a year now, both indexes move in the same direction, and show the same fluctuations (see Appendix 2 for a graphical representation). It seems that there is a clear pattern of movement between the two indexes. This can be used to show how far the British and the Dutch economy are interrelated.
Interestingly, there were no major consequences for the AEX and the FTSE indexes on the day where the decision was taken to trigger Article 50, which will take the process of Brexit one step further. This can perhaps be explained by the fact that most pundits were expecting this to happen, as it was already announced a few weeks earlier, and hence it was not seen as a surprise.

Finally, it can be seen on the graph that since the beginning of April 2017, the gap between the two indexes has very much been reduced, and is almost non-existent today. This shows that the Dutch economy is actually faring better than the British one. Could this be a sign that the Netherlands, and perhaps the EU overall, will suffer less from the Brexit than the United Kingdom itself? This will be discussed in the next section.
A Realistic Point of View:
It is easy to draw rapid conclusions on the effect of the Brexit on the Dutch economy. However, some important points have to be taken into account. These points substantiate the idea that the Brexit might also have some positive impacts on the Dutch economy, and perhaps even on the European economy as a whole.
First of all, the actual exit of the UK from the European Union is yet to happen (CPB Netherlands Bureau for Economic Policy Analysis, 2017). As a result of this, the member states of the EU, including the Netherlands, still have time anticipate the withdrawal of the UK, partially reducing its negative impact on their economy. In fact, Jeroen Dijsselbloem, the Dutch Minister of Finance and President of the Eurogroup said in a recent speech: “To me it is obvious: We need to strengthen what we have and finish it, not build more extensions to the European house while it is so unstable” (Newsweek, 2016). In short, it seems that the European politicians and hence the countries from the European Union have a desire to reinforce what already exists, by creating more cohesion between member states.
Secondly, it is very probable that the UK will negotiate trade and tariffs agreements with the EU. The UK will want to ensure similar trade regulations with the rest of the member states, from tariffs to importation restrictions. The more similar the regulations are, the lesser the impact on the economy of the UK and the member states. However, we are entitled to ask ourselves a question here: will the European Union allow this, or will it make an example of Brexit, in order to show the repercussions it can have on a country if it decided to quit the union?
Other assumptions found in the CPB Netherlands Bureau for Economic Policy Analysis are that, as the UK would be less interesting for investors, there would be a redistribution of investments within the EU, potentially benefitting the Netherlands, and other member states. In fact, HSBC said that it might switch 1,000 banking jobs to Paris after the Brexit (The Guardian, 2016). In 2016, the New York Times named Amsterdam “the most likely city to become the ‘new London’ in Europe” (Business Insider Nederland, 2017). The article also mentions the fact that Amsterdam has good infrastructures, is close from Paris and from Western Germany, and it has passport rights. For all of these reasons, Amsterdam is very attractive to the financial industry, especially niches, such as Fintech for example.


To conclude, the Netherlands will suffer from the Brexit. First of all, the country will face issues regarding its exportations, its financial services and its multinationals. Moreover, the Dutch economy may suffer from growing uncertainty regarding the European Union itself. In fact, elections all over the European Union are threatening to bring more Euro sceptics to power. However, it is important to take into account that the actual withdrawal from the UK itself will only occur in two years. During these two years, the member states of the EU will have time to anticipate and adapt their strategy. Further, the UK will also have the opportunity to negotiate trading agreements with the EU, which will help to control the damages in the long run. And finally, the Dutch economy might also have some interests in the Brexit, with the potential delocalisation of companies from London to Amsterdam for example.



Figure 1: Brexit Exposure Metrics


Figure 2: Chart showing the evolution of the British and Dutch financial indexes. In blue is the FTSE 100 and in orange is the AEX index.

Reuters. 2016. Effect of Brexit ‘relatively severe’ for Dutch economy – government forecaster. [ONLINE] Available at: [Accessed 9 April 2017].
Global Counsel. 2015. Brexit the impact on the UK and the EU. [ONLINE] Available at: [Accessed 9 April 2017].

CPB Netherlands Bureau for Economic Policy Analysis. 2016. Brexit Affects the Netherlands more than many EU Countries. [ONLINE] Available at: [Accessed 10 April 2017].

CIA. 2016. The World Factbook. [ONLINE] Available at: [Accessed 12 April 2017].

Trading Economics. 2016. [ONLINE] Available at: [Accessed 12 April 2017].

Financial Times. 2016. How will Brexit result affect France, Germany and the rest of Europe? [ONLINE] Available at: [Accessed 11 April 2017].

Dutch 2017. Dutch fishermen and farmers will feel impact of a hard Brexit. [ONLINE]. Available at: [Accessed 13 April 2017].

The Guardian. 2016. FTSE 100 and sterling plummet on Brexit vote. [ONLINE]. Available at: [Accessed 11 April 2017].

Chicago Tribune. 2016. Stocks plunge after Brexit vote; Dow drops 611 points; Nasdaq has worst day since 2011. [ONLINE]. Available at: [Accessed 11 April 2017].

Bloomberg. 2017. AEX Index. [ONLINE]. Available at: [Accessed 11 April 2017].

Newsweek. 2016. How Europe can save itself after Brexit. [ONLINE]. Available at: [Accessed 10 April 2017].

The Guardian. 2016. HSBC could switch 1,000 banking jobs to France after a Brexit vote. [ONLINE]. Available at: [Accessed 11 April 2017].

Business Insider Netherlands. 2017. Holland is shaping up to be a surprise beneficiary of Brexit. [ONLINE].

Available at: [Accessed 12 April 2017].

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