Economic consequences for the Netherlands in the case of a hard Brexit
The Netherlands and the United Kingdom (UK) do a lot of business. In fact, the UK is the third most important export country for the Netherlands, after Germany and Belgium. The Netherlands Bureau for Economic Policy Analysis (CPB) calculated the impact of Brexit on the Dutch economy. The damage caused by less trade with the UK could amount to 1.2 % of gross domestic product in 2030, for an amount of 10 billion euros. Less trade may also lead to less innovation in different sectors.
The Netherlands is one of the countries that will be hardest hit by a so-called hard Brexit, according to a projection by the International Monetary Fund in 2018. In this scenario, the UK would become a third country for the EU and will fall back on the rules of the World Trade Organisation. In fact, for Dutch companies, the UK will become a country such as Australia or Argentina. This could cost the Netherlands 0.7 % of gross domestic product (GDP). The IMF calculation shows that only Ireland would be hit harder.
In case of a hard Brexit, it would become more difficult to export fish, flowers and tomatoes. This is problematic for the Netherlands since it is the largest exporter of agricultural food products to the United Kingdom. Moreover, the open account for the British has been set at 39 billion euros. If there is an agreement, they will transfer that amount to the European Union account. But if there is no agreement, European countries will have to pay for it themselves, which will mean a few billion extra contributions for the Netherlands. And that in turn has an impact on government finances. It could be the difference between a budget surplus or deficit.
Hope for the best, prepare for the worst?
“A thorough preparation takes time, and certainty about the outcome of the negotiations will come too late”- this is how the Dutch government warned Dutch companies to start early to prepare for all Brexit scenarios on the table. To enable the business community to prepare properly, the government decided to offer the Dutch business community various forms of support. Immediately after the referendum, a Brexit counter (www.brexitloket.nl) was established, connected to the Netherlands Enterprise Agency and the Chamber of Commerce. Entrepreneurs have the opportunity to contact this counter with all their questions about Brexit. An activation tool was also launched, which enables companies to map out which preparations are important in the run-up to the date of the UK’s withdrawal from the EU. For example, mapping the consequences for imports, exports, contracts, digital data, intellectual property, transport and supply. Entrepreneurs were also assisted in intensifying trade with third countries in order to mitigate the consequences of Brexit, and entrepreneurs were helped to seize the opportunities of Brexit.
Brexit also offers opportunities for Dutch companies. British entrepreneurs will soon be less competitive in trade with the EU in some sectors. This will make it easier for Dutch entrepreneurs to look for other markets for their products. Because of Brexit, the European Medicines Agency (EMA) has moved from London to Amsterdam, which provides visitors and direct spending in the Netherlands.
Political consequences of a hard Brexit for the Netherlands
The liberal, Eurosceptic British often fitted in well with the Dutch policy of a small and trade-oriented EU. This was particularly important in the Council of the European Union, where ministers decide on European laws and regulations, and in the European Council (of government leaders). A departure from the United Kingdom makes the Netherlands more important on the European stage – which is good news, but it also brings difficulties. Because working with one large United Kingdom is much easier than working with ten small countries from Northern and Eastern Europe. The table below shows the relative change in influence of each member state after Brexit:
Where does the Netherlands need to look for potential new ‘friends’ to team up with? VNO-NCW, a Dutch employers’ federation, pointed out a few combinations of countries that agree with the Netherlands on certain topics:
- EU budget: Denmark + Finland + Austria + Sweden
- Budgetary discipline: Denmark + Estonia + Finland + Ireland + Latvia + Lithuania + Sweden
- Internal market: Hungary + Poland + Slovakia + Czechia
Goodbye my lover, goodbye my friend
As demonstrated by looking at the possible economic and political consequences a hard Brexit could have, the Netherlands should brace itself for the worst. But it also has taken all the possible preparatory measures in order to reduce the impact a hard Brexit could have, a scenario that is becoming more likely by the day. ‘Better to have a good neighbour than a distant friend’ is a famous proverb in the Netherlands – but the Dutch will have to get used to appreciate a new, long-distance kind of relationships.