A Dutch governmental agency has issued a report that examines possible near-term implications of the UK’s departure from the European Union—Brexit.
The Dutch Environment Assessment Agency (Planbureau voor de Leefomgeving) on 19 February 2019 released a report providing both an industry sector focus (62 industries) and a province (12 provinces) analysis of the near-term implications on companies (international) competitive positions. In this connection “near term” (or “short term”) means potential implications arising immediately after Brexit, without factoring in any subsequent behavioral changes of businesses, governments, and consumers.
In its cross-European analysis (commissioned by the Dutch Ministry of Economic Affairs and Climate Policy), the agency focused on the comparative-cost increases arising out of the tariff and non-tariff barriers that will come into being immediately after Brexit. Specifically the study compares company positions with those of domestic and foreign competitors.
The “hard” Brexit scenario has been used—i.e., factoring in WTO tariff rates supplemented with the cost of non-tariff barriers. Therefore, the analysis does not use the “no deal” scenario with its associated various short-term trade disruptions. The direct Brexit implications arise from higher sales prices for goods and services supplied (from the Netherlands) to the UK while the indirect impacts arise from the higher prices that are to be paid by (Dutch) companies for goods and services imported from the UK.
According to the findings in the agency’s report, the competitive positions of Dutch telecom, financial services, and travel/leisure companies in the Netherlands will be positively affected, while in the UK, the telecom, financial services, restaurants, car manufacturing and electronics industries will be negatively affected. Among the negatively affected Dutch companies are those in agriculture, chemicals, food production, retail (non-cars), and land transport, but the agency does not see compensating positive effects in the UK. The only areas where the agency sees positive competitive implications for UK companies are food production and wholesale trading.
At the European level, the “winners” include car manufacturing, storage/logistics, financial services, and real estate while the “losers” include food production, chemicals, metal products, and non-car retail.
In the main western provinces of the Netherlands (North Holland, South Holland, and Utrecht) the agency sees important positive effects on companies’ competitive positions in the storage/logistics, restaurants, financial services, and travel/leisure industries while negative effects are forecasted for agriculture, food production, chemicals, and machine building.
In the Southern provinces of Noord-Brabant and Limburg, the positive impacts are in car manufacturing, restaurants, financial services, real estate, and travel/leisure while the negatives include electronics, machine building, and furniture production. In the other provinces, “red alerts” are often found in the metal products and furniture industries.
The agency is confident that the results of its analysis can be used to help define the negotiation strategy of the Netherlands as the government shows the relevant strengths and weaknesses of the Netherlands (and its constituent regions) vis-à-vis the average positions of the other European countries.
Whether multinational companies contemplating a move from or to the UK, the Netherlands or another European country will accept the agency’s analysis of short-term cost differentials as a solid basis for making investment decisions remains to be seen. The recent history of new foreign investment into the Netherlands shows what the real life industry focus and foreign background has been.
A recent report published by the Netherlands Foreign Investment Agency (NFIA) said that a total of 372 foreign companies generated 9,847 additional jobs in the Netherlands in 2018. Collectively, these companies contributed €2.85 billion to the Dutch economy. The NFIA report shows that the majority of new jobs are created within headquarters (2,259), followed by marketing and sales offices (1,834), distribution centers (1,053), service centers (977), production sites (884), and research and development (R&D) locations (755). The majority of “foreign jobs” were created by U.S. companies. In 2018, this accounted for 3,185 jobs, with a total accompanying investment of €1.19 billion. Following the United States is the UK (1,596 jobs), then China (614 jobs), Japan (580 jobs), and Germany (300 jobs).
Read a February 2019 report prepared by the KPMG member firm in the Netherlands
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