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Fintech And The Netherlands' Post-Brexit Allure

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After MPs voted to reject Theresa May’s Brexit deal and following the vote on a motion of no confidence for the U.K. Prime Minister, the Government then decided to develop a non-binding agreement, ultimately rejecting a no deal Brexit.

There was also a vote for the backstop to be replaced so that there would not be what has been referred to as a ‘hard Irish border’. Therefore, it is still unclear what will happen when May returns to Brussels to renegotiate, if there will be a no deal, another referendum, another general election or another no confidence vote.

Despite all these movements, or lack of, the lingering question for those operating in financial services or the fintech industry is how it will affect trade and business in London, but also other capital cities such as Paris, Frankfurt and Amsterdam.

Ahead of Tuesday’s developments, I had an interesting and enlightening conversation with Niels Turfboer, managing director of Spotcap - a lender to small and medium sized businesses - about how Brexit will affect the fintech industry in the U.K. and in his home country, the Netherlands.

In addition to this, we discussed the future of collaboration and Turfboer used their upcoming partnership with Starling Bank, as an example. In 2018, the World Bank put the Netherlands 32nd on a list of 190 countries for the Ease of Doing Business and Forbes ranked the country in 3rd position for business friendliness, after the UK and New Zealand but before Sweden and Canada.

According to a recent report put together by B-Hive, the Netherlands is a world-class business destination and is in the top 10 in terms of “infrastructure, health and primary education, higher education and training, goods market efficiency, technological readiness, business sophistication and innovation.”

Alongside this, the Netherlands have a skilled labor force, a competitive fiscal climate and a welcoming culture that is open to new ideas. The B-Hive report also claims that “the Dutch financial sector is currently well-positioned in Europe.

“The financial and business services sector is one of the largest economic sectors in the Netherlands, and the Amsterdam Metropolitan Area lies at its heart. It generates an estimated 20% of the region’s GDP and 15% of its jobs.” Here’s what Niels Turfboer, who has been living in London for five years, had to say on the subject.

Madhvi Mavadiya: What impact will Brexit have on the Dutch economy?

Niels Turfboer: The Netherlands is a trade nation and has always been one, but one of our biggest trade partners is the U.K. We export approximately £22 billion ($29bn), so that is quite substantial and anywhere between 2 and 3 percent of the Dutch GDP comes from the trade from the U.K.

Clearly, whatever deal is reached, it’s very important for the Netherlands, but I think it is important to state that the Dutch do not have an opinion about whether the U.K. should be in or out of the EU. Obviously, everyone prefers if the U.K. was part of the EU, but if they choose to leave, there will be some issues if it does not happen in an orderly fashion. In the case of a hard Brexit, there will be a big impact on the U.K. and countries like the Netherlands.

MM: How would a hard Brexit affect trade in the Netherlands?

NT: There are a lot of logistical problems that have been covered in the Dutch media about how it will affect our ports of entry - the Port of Rotterdam is one of the biggest in the world and does not have the capacity to deal with sudden trading under WTO standards with one of its biggest trade partners.

MM: What is the attitude towards Brexit in the Netherlands?

NT: I can’t speak for all 17 million, but I can speak for myself and the people that I know. We find it surprising to see certain people in U.K. politics proclaiming that a no deal Brexit is not going to cause problems and that saying that it will, is fearmongering, or Project Fear, as they refer to it. With the sheer amount of trade that is done between the two countries, it just doesn’t make sense for people to say that. That surprises Dutch people, speaking as one of them, that those opinions can be voiced without anyone calling them out for not acknowledging the data that is out there.

MM: Will Brexit influence Dutch financial services in the Netherlands?

NT: Whatever calculations that are made, Brexit will be negative for financial services and the fintech industry. There are rumors that Amsterdam will attract some players in the financial space, but they are merely speaking with the Dutch government and are undecided about the move.

MM: What about fintech?

NT: Although there is a booming fintech scene in the Netherlands and Spotcap operates in both, it is not comparable to London where the ecosystem is very different from Amsterdam and there are so many firms represented. We are currently in the third wave of fintech that is all about collaboration—and not only about collaborating with large financial institutions.

I don’t think any of the European cities, Amsterdam included, can replicate what London can offer, so there may be some companies that are forced to move. Overall it will be a negative for fintech if London ceases to be attractive as the fintech scene might become more dispersed. Some will go to Paris, some will go to Frankfurt, some will go to Amsterdam but for continued development and innovation, the best thing is that they are all in the same ecosystem.

More and more fintechs are partnering with each other and more and more fintechs are partnering with banks and we ourselves are one of the exponents of this. For example, with Starling Bank, we are looking at how we can work together to give SMEs better access to business loans. We have similar DNA, and a focus on improving the end-user experience, so pursuing a partnership makes sense. Being in the same place makes the whole process easier.

MM: Will there be any changes to immigration policy, or is this just fearmongering? How will this affect talent in the fintech industry?

NT: We have always enjoyed a good relationship with the U.K. but once the Brexit vote was announced, the first thing that surprised me was that the Dutch Prime Minister said that the Netherlands will not be offering dual nationalities to Dutch people. That debate is shifting and there are a few rumors that this may be changing now, although nothing has been confirmed.

However, I know quite a lot of Dutch people living and working in London and most of them do not want to have a British passport and they are fine with their settled status. What’s more, if you look at the statistics, there are a lot of Dutch people who come here for a certain period of their career and at a certain time they go back.

The U.K. has suffered from so much uncertainty and emotions are running high. A clear plan will bring reassurance to people at an individual level, and the same applies on a larger scale, for businesses. We’re all waiting for a sense of direction that will allow the U.K. to continue its fintech success story.

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