Last year, 52% of the British population voted in favour of leaving the European Union, a historic and unexpected event known as ‘’Brexit’’. Brexit is said to have complicated and long-term impacts on the financial services sector in the UK since companies will no longer be able to operate within the European framework. This could potentially block access to clients and significantly interfere with business.
London’s lead location as the core of the financial services industry is also under severe pressure. With Brexit, the race to become the new London has started and cities like Amsterdam, Paris and Frankfurt are lining up for the position.
An interesting appearance amongst the large digitalised cities is Amsterdam. Big financial players such as Mitsubishi UFJ Financial Group (Japan’s biggest bank) and Royal Bank of Scotland are set to move their operations to Amsterdam.
The big move towards Amsterdam has to do with the possibilities the city offers for Fintechs, clearing houses and high frequency trading. The digital connectivity of the city, its geographical location and that it already has a financial sector is another plus. The Netherlands also has strong insurance and pension sectors and big data storage centres, which can be interesting to large businesses.
Apart from advantages, there are also numerous challenges. The Dutch financial world is still suffering from the 2008 financial crisis, which has led to continuous bank layoffs. The size of Amsterdam’s financial sector imposes another problem: it is simply too small to make it an interesting location for big banks.
Another disadvantage for Amsterdam is the high corporate tax rate. This disadvantage is however being addressed by the recently published coalition agreement by the Dutch Government. The agreement increases the competitive advantage against other European cities by lowering corporate income taxes and the removal of the infamous Dutch dividend tax.
Amsterdam is overall not the first choice for a potential post-Brexit city due its financial character and size. It can however function as an interesting hub that is part of a bigger network of cities that attract specific financial services sectors. This way, the city could continue to focus on its strengths, which are innovation and digital connectivity without the weight and responsibilities of the core of a financial heart.
There is still a lot of on-going turmoil surrounding Brexit. For that matter, the European Banking Authority (EBA) has published an opinion paper, providing guidance to authorities and institutions on Brexit relocations.
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