Amsterdam could be the biggest beneficiary of Brexit

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For the past months, Amsterdam was found in the limelight after Brexit impacted all the Europe, and its financial capitals. The Dutch capital became the biggest share-trading centre on the continent, after London lost its leading position after Brexit.

Previously, Amsterdam had a sixth position in the ranking, as their daily (average) trading was €2.6 billion in 2020. But then, in 2021 it rocketed to €9.2 billion daily, after London’s average daily trading fell to €8.6 billion from €17.5 billion.

This of course was a positive change for Amsterdam, and to add to that, the Intercontinental Exchange (ICE) announced that EU carbon allowances trading (which is worth more than €1 billion daily), would be actually shifted to Amsterdam’s ICE Endex. This news hit the headlines, and the examples of London’s diminishing status were piling up. It did not stop in February but kept going during March as well.

All this followed the succession of EU-trading platforms. For example, in November 2020 the London Stock Exchanges’ Turquoise became live in Amsterdam for shares that are euro-dominated.

The reaction of commentators to the Brexit-caused shift

The commentaries seem to be trodding a path that could be perceived as a more restrained one. The Guardian’s Kalyeena Makortoff, who is their banking correspondent, believes that this change shall be compared to changing the location of a computer, that is processing orders for an online store. While the location of ‘headquarters’ has not remained the same, the suppliers and customers could act like nothing has changed. Likewise, as the trading of shares has shifted, the brokers, asset managers and brokers could in fact still be working from London.

The former adviser of Boris Johnson, Gerard Lyons, who was one of the founding fathers of Economists for Brexit, has published a piece in Spectator, where he dwelled on a pro-London sentiment and also tried to provide some technical explanation of the case. At the same time, Times economist, Phil Aldrick showed his readers some deeper context of it.

And rightfully so. The City of London seems to have some impressive ‘bouncebackability’ possibilities, as the latest data published by CBOE showed how it regained its place. But the daily averages are still far below the pre-Brexit levels. In June, it was somewhere around €8.9 billion of, while Amsterdam noted €8.8 billion worth of share trades daily.

The London advocates have probably celebrated a bit. Maybe the leading position is symbolic, but it accurately shows the post-Brexit environment. Will these trends sustain?

How has the Netherlands managed to draw such an attention after Brexit?

But how has this story (of Brexit) played out for people seeking to woo businesses to Amsterdam? NFIA (Netherlands Foreign Investment Agency) seems to have an answer. Michiel Bakhuizen, who is their spokesperson and strategic adviser, says that their Agency was able to quickly plan and also find sectors that will face some problems. One of those was the licensing issue of the companies offering financial services. This was after the United Kingdom citizens went to voting booths in 2016, and the results were in favour of Brexit (52% to 48%).

They simply started to contact those companies, and the response was impressively positive. The context of Brexit became a pressing issue for most of the companies using Fintech and financial solutions.

NFIA also found clusters which appeared irrelevant for their case. For example, it became obvious that investment banks would be unwilling to expand to the Netherlands (because of the bonus-cap rules there). In 2015 (after the financial crisis), Netherlands decided to limit the maximum variable pay of financial sector workers to 20% of their base salary. This could be the main reason, why Amsterdam missed out on the relocations of the biggest names in banking.

To get to know what backlash and effect it had on the Dutch market, we advise you to visit Disruption Banking page and read into Ian Hall’s brilliant piece of writing about the matter. To access, use the following link: https://disruptionbanking.com/2021/07/28/brexit-fallout-amsterdam-trades-up/