Could Amsterdam Become Europe's New Financial Capital?
WHY YOU SHOULD CARE
Because Brexit will have all kinds of fallout.
By Sean Braswell
It was called the Dutch Golden Age. During the 17th century, Amsterdam transformed from a low-lying medieval bog town into a thriving metropolis, whose trade, art, science and industry were the envy of Europe. Goods from around the world were bought, sold and exchanged in the city’s massive marketplace and distributed throughout Europe by its unrivaled shipping industry. To support its bustling commercial sector, Amsterdam also became a financial pioneer, with an exchange bank that held more than 16 million guilders in deposits by 1700.
Eventually, economic growth slowed and “the Venice of the North” lost its market dominance and was replaced by a new economic power: London. But in the wake of the surprising Brexit vote in the U.K., the long arc of history is moving forward again — and bending back — as several European cities, including Amsterdam, jostle to replace London as Europe’s financial capital. Tesla, Uber and Netflix are among the growing number of companies that have recently established European headquarters in Amsterdam, and the city already has a thriving tech scene that the 2015 European Digital City Index ranked as the second best in the Continent for startups (behind London) — not bad for a city with a population of around 800,000 that is less populous than Columbus, Ohio.
Will more companies go Dutch in the wake of Brexit?
Speculation began almost immediately after the Brexit news as to which city would become the “new London,” once the capital of European finance is no longer actually part of Europe. Amsterdam topped the rankings set out by The New York Times business columnist James Stewart, and it’s not hard to see why: The capital city of the Netherlands is already a talented global village, with more than 2,700 international companies based in a city that also boasts 180 different nationalities, according to Amsterdam Marketing. Not to mention a nation that is fluent in the language of global finance, English. “Throw in great public transport and services, top-notch restaurants and bars, and plenty of English-language cultural events,” says Matthew Elworthy, who has lived and worked in both London and Amsterdam for The Next Web, a technology, media and events company, “and it becomes apparent that there aren’t many European cities that it would be easier to live in.”
And not only is the bike-friendly, museum and canal-laden city easy to navigate itself (and its airport is frequently ranked first in Europe), but Amsterdam is connected by an efficient rail system to other European capitals, including a short journey away from the EU capital of Brussels. A host of tax and legal incentives, including a 2015 immigration law that provides special visas for startup entrepreneurs, has made the Netherlands an attractive destination for young companies. Will even more companies now go Dutch in the wake of Brexit? “I cannot say the names, but a number of Asian companies operating in the finance sector and located in London have turned to us in recent weeks,” Amsterdam’s Deputy Mayor Kajsa Ollongren told a Dutch daily newspaper shortly after Brexit.
Yet there are good reasons why many financial firms could remain locked in London — or look elsewhere in cities such as Frankfurt. Amsterdam’s limited size, combined with the tech boom, have made the property market tight, with house prices surging 17 percent last year, according to the Dutch Association of Estate Agents and Valuers. Moreover, the Netherlands has a personal tax rate of 52 percent on its highest income bracket and a cap on bankers’ bonuses at 20 percent of their salaries — both less favorable than elsewhere in the EU.
In a bid to attract more skilled foreign workers, the government in the Netherlands has relaxed these rates somewhat on expats. And Amsterdam’s overall business environment is good, says Mark Yeandle, a director of the Z/Yen Group in London. But he notes the city is “unlikely to fight off all the competition from cities like Frankfurt and Zurich” in the wake of Brexit. In fact, Yeandle, who is the lead author of the Global Financial Centers Index, which ranks major financial centers in terms of competitiveness, predicts that “if there is a big move away from London, none of these centers is likely to take over from London by itself.” Indeed, having moved back to London directly after Amsterdam, Elworthy says that the Dutch city is still “a long way off from offering the sort of scale of networking, support and diversity of London’s scene,” an advantage built over centuries.
Still, some sort of shift from London is inevitable, and Amsterdam will capture some of that business, perhaps becoming “a European leader” as a financial technologies hub, says Yeandle, or continuing to develop as “a channel into Europe for international companies,” as Elworthy puts it. And even if that future does not include supplanting London as Europe’s financial capital, it seems that a second Dutch Golden Age may well be under way.