In recent years, it has become evident that Amsterdam is gaining traction as a desirable destination for banking and financial services institutions. There have been many catalysts for this, including the UK losing its long-standing attraction and allure by distancing itself from the EU following its membership withdrawal. This has certainly come at a cost, as it allows other cities to take advantage of this situation. Furthermore, aspects of effective policy-making on issues such as tax policies, digitalization, and social elements have all come into play throughout this process. By analyzing these factors, we can point to Amsterdam’s future prospects being highly optimistic in the long run.
Ever since Brexit came into effect in 2020, the UK effectively lost access to the EU single market. This had a range of implications for its economy and overall business prospects. Generally speaking, some top companies were in opposition to Brexit in the first place leading up to the 2016 referendum and made public announcements to that end. Large banking and financial institutions had a lot on the line if Brexit were to come to fruition at that time. This led them to put additional pressure on the government to stop it from ever occurring by threatening to withdraw from the UK market. This could have been achieved by legally moving their headquarters to another EU member state, although it would notably take much effort for the workforce to follow and move as well. However, despite the public statements and threats of these companies, there was little progress and Brexit was ultimately finalized.
Figure 1: Number of Private Sector Businesses in the UK
Financial institutions and big banks were among the first ones to react to Brexit by indeed commencing their move back to countries in the EU, mainly due to the efficiency of operations and regulatory concerns. It was unclear whether changes in legislation would negatively impact their work. The UK had only managed to guarantee equivalent treatment for companies in some cases, without legal or regulatory changes. Potential obstacles were thereby to be avoided, mirroring what was previously had when the UK was still part of the EU. Indeed, the UK government had also been unwilling to enter into meaningful discussions with the EU on these key matters up until the companies were already forced to take action and move back to the EU as a preventative measure. Recently, the outflow of companies has shown signs of reversing, with momentum picking up in 2023. However, the number of companies still remains lower than pre-Brexit levels.
The Amsterdam Stock Exchange has managed to attract many IPOs and investors through its innovative work. First and foremost, it is notable to mention that there is a lot of competition between stock exchanges on a global scale. This includes price competition and only nuances between the service quality and breadth. Nonetheless, with international brokers usually being connected to many if not all of the stock exchanges all over the world, it does not make a significant difference listing in London, New York, or otherwise, at least from the perspective of a company retaining its investor pool or growing it further. In a Room for Discussion interview, Simone Huis in 't Veld, the now ex-CEO of Euronext Amsterdam, outlined that Amsterdam has become the first consideration for IPOs and trading in general. She explained that the key reasons for this are the unique Euronext trading platform, the quality of their trading book, and the numerous educational programs available to companies. Euronext has 7 exchanges across the world; however, from a domestic standpoint, Amsterdam mostly draws in technology, media, and telecom companies with international companies expeditiously joining and diversifying this range of industries. To put into perspective how far internationalization has affected the Netherlands, she pointed out that 75% of capital comes from abroad. International investors attract international companies, and vice versa. Ultimately these factors were all at play in attracting such a diverse pool of companies to Amsterdam.
Figure 2: The Euronext Amsterdam Stock Exchange
One of the key benefits for Financial Institutions are the EU Passporting Rights. The rules behind this stipulate that a European Union company can do business in any other EU member state. This benefits all companies from all industries and is one of the foundations of the EU, based on the principle of free movement of capital, goods, and services. Focusing more on capital, financial and banking institutions are particularly concerned about developing their business in the most efficient way possible, often juggling complex government interventions and regulations in the midst of their endeavor. By leaving the EU, UK companies effectively lost their Passporting Rights. This means that they now had to apply for licenses for each country in which they wanted to do business, thereby posing a high loss to efficiency for companies. Ultimately, this factor enabled Amsterdam to further surpass London as an economic driver.
Fintech has also visibly been drawn to Amsterdam on account of its diverse workforce and infrastructure. Statistics show that there has even been around a 35.6% increase in the number of registered Fintech companies in the Netherlands (861 in 2023, up from 635 in 2019) showing this pull in practice. EY’s research suggests that fintechs mainly cite digital infrastructure, English language proficiency, and culture as key drivers of the move to Amsterdam. One fintech company, Adyen, headquartered in Amsterdam, has managed to grow to 4000+ employees and over 970 billion EUR of processed payments per year. Similar trends have been noticed across the industry within the Amsterdam ecosystem. Furthermore, the reasons behind this among others include the ease of doing business in the Netherlands. There are several aspects that contribute to this including tax policies, regulations, and an efficient digital system for companies to fulfill requirements asked for by the government.
The Netherlands holds itself to a high standard and is immersed in sustainability through its use of eco-friendly solutions in all spheres of life. This mentality transverses into business as well. Amsterdam is a center for green finance and sustainable investment. Companies focusing on Environmental, Social, and Governance principles (ESG) are drawn to the city. It is visible that there has been an influx of companies with an ESG focus being founded or traditionally-led companies changing course and adapting in such a way to embrace these principles. The Dutch government has introduced bills to hold companies accountable for their ESG reporting or lack thereof. Nonetheless, there is no personal liability of the key executives and it is limited to fines. This, indeed, puts into question the extent to which companies will change their behavior from the bottom up. This, however, does not negate the socially responsible nature that the Netherlands offers to prospective companies that may decide to move there.
During the summer of 2024, London managed to snap back, regaining trading volume and value, once again surpassing Amsterdam. It seems that with GBP 9.3 billion in daily trading volume, the London Stock Exchange achieved its first significant lead in over three years. By comparison, Amsterdam’s EUR 8.9 billion daily trading volume in May 2024 was slightly behind. Nonetheless, the Amsterdam stock exchange remains on a rising trajectory with their index fund NL25 — encompassing the top 25 companies trading in Amsterdam — having grown by around 15% since the beginning of 2024. This gives further optimism and bullishness to investors and companies, domestically and internationally.
Whether Amsterdam can maintain its dominant position in this complex world of financial markets and investments remains to be seen. One thing is certain: the competition with London is fierce and both sides are constantly innovating and trying to catch up. The world of finance is getting more streamlined every day, and we still do not see the full impact AI will have on the world, but also the financial markets. Both sides have to craft their future strategies carefully to maximize their positive impact on investors and enhance their role as intermediaries. Amsterdam is set to become an even larger financial hub than it is today. Moreover, the rules and regulations imposed by the Dutch government and the investment climate will pave the way for an upward trajectory.
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