How did Amsterdam benefit from Brexit?

How did Amsterdam benefit from Brexit?

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Six months after the United Kingdom departed the European Union, and we’re still observing how Amsterdam stepped into the limelight. The ongoing Brexit backlash keeps on propelling Dutch capital. How is this possible?

The Dutch capital took over as the leading trading hub in Europe. Before London had to step down, Amsterdam was only sixth in the classification, but neither Frankfurt nor Paris managed to benefit so much from Brexit. All this is thanks to the smart moves of Dutch regulators. But before we dwell on this topic, let’s give this whole piece a bit of context.

Before Brexit, Amsterdam had a daily trading average of €2.6 billion (in 2020), and after the United Kingdom’s departure from the EU, it skyrocketed to €9.2 billion in January only. All this with London’s average halving (it fell from €17.5 billion to €8.6 billion). What is interesting, only Amsterdam managed to take over London, which (despite major losses) fell only to second place in Europe.

The vibes in Amsterdam and around it were of course positive, especially as the Intercontinental Exchange (ICE) announced that European Union trading allowances will be shifted to Dutch capital ICE Endex. The major success for Amsterdam, as these allowances are worth around €1 billion daily. Media of course picked all this up and started to find more examples of London’s failure and diminishing status. In March, it only kept going.

This breakthrough followed an opening of EU-specific platforms for trading in the Netherlands. For instance, London’s Turquoise was made live there back in November 2020. This imposes a question about the scale of readiness to shift to Amsterdam’s trading.

Commentaries seem to be a bit restrained when it comes to judging the case. In many eyes, this change does not influence lives of traders heavily. They compare it to moving of a computer processing purchases from online stores. While it is a change for the computers, the customers could live unbothered. Likewise, the traders do not have to relocate from London. And so do asset managers and brokers.

Commentators’ reactions

Gerard Lyons, who worked as Boris Johnson adviser in the past, and also was one of the Economists for Brexit founders, wrote a Spectator piece, where he expressed a sentiment for London, while The Times’ Phil Aldrick gives this whole case some wider context. While Aldrick believed that the change of leader is symbolic, he also claimed that it’s not that meaningful.

Nevertheless, London proved to have some form of ‘bouncebackability’. Bloomberg has presented some data that proves it actually regained the first place in Europe, although the decrease (when compared to 2020) is critical. In June, €8.9 billion worth of trades was conducted in London, when in Amsterdam it was €8.8 billion on average.

London advocates probably sighed and popped a bottle open, when this happened. But let’s not forget the €17.5 billion average from before Brexit. It’s almost a double when compared to their current results.

How did Brexit play out for the Dutch officials?

Maybe Amsterdam lost its leading position in the second quarter of 2021, but it honestly gained so much in the last months. The NFIA (Netherlands Foreign Investment Agency) has actually planned this, and their success is great.

Back when the United Kingdom’s citizens went to voting booths in 2016 and decided to leave the EU (52% in favour), NFIA started to plan their next steps and identify the sectors they could come in handy for firms. They quickly discovered that financial services companies would in fact face some licensing problems in the Netherlands. But they still had some time to change things up.

That is why NFIA contacted companies, and they began responding. Michiel Bakhuizen, who is their spokesperson and strategic adviser, says that their Agency also managed to identify some clusters, for example that the investment banking will not be very keen to move because of the Dutch bonus-cap rules.

To find out more details about the cap, use the following link and read the brilliant Disruption Banking piece by Ian Hall: check https://disruptionbanking.com/2021/07/28/brexit-fallout-amsterdam-trades-up/.

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