How will Brexit affect the Netherlands?
Since 31 January 2020 the United Kingdom (UK) has no longer been part of the EU. A Trade and Cooperation Agreement between EU and the UK was agreed on 24 December 2020.
As the Netherlands has longstanding and close ties with the UK, Brexit affects the Netherlands in many ways. These ties are not just financial and economic, but also political, as the Netherlands and the UK often shared the same views on policies and funding.
The main impact of Brexit is being felt in trade, the economy and customs and in the Dutch contribution to the EU.
Brexit will result in the Netherlands’ contribution to the EU increasing from just under €9 billion in 2021 to nearly €10 billion in 2027.
The Netherlands Bureau for Economic Policy Analysis (CPB) examined the possible impact on the Dutch economy. It calculated that the decline in trade with the UK will reduce the Netherlands’ GDP by between 0.9% and 1.5% in 2030, with lost income of approximately €8 – €13.3 billion.
The EU has set up the Brexit Adjustment Reserve to help EU businesses adversely affected by Brexit.
More information
Our audit of the Dutch government’s preparations for Brexit that we published on 10 December 2018 lists the various costs of Brexit for the Netherlands (data as at mid-2018):
Among other things, we found that the short-term (i.e. in 2019-2020) direct costs to the Netherlands of a ‘no-deal’ Brexit would be €1.6 billion. At the time our report was published, the date set for the UK’s departure from the EU was 29 March 2019. The actual Brexit date was 31 January 2020. A trade agreement was concluded on 24 December 2020, thus averting a no-deal Brexit.
Consequences for the Netherlands’ contribution to the EU
Owing to Brexit the Netherlands will have to make a higher contribution to the EU budget – even if the budget remains unchanged. This is because, following the UK’s exit, 27 rather than 28 member states will be responsible for the EU budget, to which the UK had previously been a net contributor.
The EU’s MFF 2021-2027 plays an important role in this respect. Under the agreement reached by the European Council on 21 July 2020, the Netherlands’ total contribution to the EU will increase from nearly €9 billion in 2021 to nearly €10 billion in 2027 (source: 2021 budget report by the Ministry of Foreign Affairs).
There had been a risk that the Netherlands would lose some or all of the current rebate on its EU contribution following the UK’s departure. A rebate reduction had been suggested in one of the European Commission’s proposals for the MFF 2021-2027. In the agreement reached by the European Council, however, the Netherlands will receive a higher annual rebate of €1.92 billion (in 2020 prices) in the forthcoming MFF period. Furthermore, the fee the Netherlands receives to cover the cost of collecting import duties will be raised from 20% to 25%.
Impact on Customs
In our 2018 audit report, we wrote that Dutch Customs would not be able to prepare itself fully for a ‘no-deal’ Brexit on 29 March 2019. The Customs authority claimed to need additional staffing of 928 FTEs in order to handle a no-deal Brexit, and said that it expected to have recruited 300 extra FTEs by the time that our audit was completed in mid-2018. In September 2019, we found that Customs expected to have recruited 596 FTEs by 1 October 2019, and that it was well on course in terms of the recruitment and deployment of Brexit staff.
Impact on the Dutch economy
The Netherlands Bureau for Economic Policy Analysis (CPB) examined the possible impact on the Dutch economy. It calculated that the decline in trade with the UK would cost the Dutch economy around 1.2% of its gross domestic product in 2030, i.e. approximately €10 billion. In an update in 2021 the CPB concluded that the Trade and Cooperation Agreement (see below) signed at the end of December 2020 in broad lines corresponded to a free trade scenario, without tariffs. The resultant decline in trade will reduce the Netherlands’ GDP by between 0.9% and 1.5% in 2030, with lost income of approximately €8 – €13.3 billion.
More information
- Brexit - Site Central Government on Brexit
- Brexit - Report by the Netherlands Court of Audit on consequences of Brexit for the Netherlands
- V Buitenlandse Zaken Rijksbegroting 2021 - Budget Ministry of Foreign Affairs 2021 (15-09-2020) (Dutch only)
- Aandachtspunten bij de ontwerpbegroting 2020 van het Ministerie van Financiën en Nationale Schuld Letter Netherlands Court of Audit to Parliament with attention to consequences of Brexit for Customs (24-09-2019) (Dutch only)
- Brexit costs for the Netherlands arise from reduced trade, CPB press release
- Brexit - CPB Column concerning costs of Brexit for the Netherlands (04-02-2021) (Dutch only)
In the referendum held on 23 June 2016, 51.9% of British voters voted in favour of the UK’s departure from the EU. The date eventually agreed for Brexit was 31 January 2020. This was also the date on which a transition period started, during which the UK and the EU negotiated the nature of their future relationship. These talks were completed on 24 December 2020.
Trade and Cooperation Agreement
The EU and the UK concluded a Trade and Cooperation Agreement on 24 December 2020. The EU member states voted in favour of the agreement on 29 December 2020, as did the UK parliament on 31 December 2020. The European Parliament ratified the Trade and Cooperation Agreement on 27 April 2021.
The agreement took effect and the new rules came into force on 1 January 2021. There have since been checks and various administrative formalities at the borders with the UK, for instance at the ports of Rotterdam, Hook of Holland and IJmuiden. Dutch fishers can catch about 25% less fish in British waters to the end on 2026, after which new talks will be held on fisheries. In addition, Dutch students can no longer study in the UK under the EU Erasmus exchange programme.
From 1 January 2022, the UK started phasing in various new customs procedures and border formalities. It is important for Dutch businesses to be aware of these new procedures and formalities, as published in the Border Operating Model. From 31 January 2024, this model is being replaced, in phases, by the Border Target Operating Model. The final version of this latter model was published on 29 August 2023. It sets out the general new procedures for trading with the UK (excluding provisions applying specifically to trade with Northern Ireland).
More information:
- EU-UK Trade and Cooperation Agreement: protecting European interests, ensuring fair competition, and continued cooperation in areas of mutual interest - European Commission press release on the trade and cooperation agreement between the UK and the EU (24-12-2020)
- Brexit - EU-VK akkoord: nieuwe regels - Information Central Government concerning trade and cooperation agreement (Dutch only)
- Border Operating Model - UK government’s explanation how the border works with the European Union (13-07-2020)
- The Border Target Operating Model: August 2023 - UK government’s explanation (12-09-2023)
Final settlement of the Withdrawal Agreement
When the UK left the EU, it agreed to settle all outstanding obligations to the EU. The estimate of this ‘divorce bill’, by the House of Commons (July 2022), is that the net cost to the UK will amount to approximately ₤35.6 billion (approximately €41 billion) in 2020-2064.
The European Court of Auditors also considers the final settlement of the Withdrawal Agreement in its annual report for 2020. In its opinion on the accounts, the European Court of Auditors notes that the Commission had estimated that the UK owed the EU €49.6 billion as at balance sheet date and the EU owed the UK €2.1 billion. On balance, the EU’s accounts therefore included a net receivable from the UK of €47.5 billion.
More information:
- Brexit: the financial settlement – a summary - Research briefing: House of Commons Financial Brexit settlement (29-07-2022)
- Annual reports concerning the financial year 2020, European Court of Auditors (26-10-2021)
During its meeting of 17-21 July 2020, the European Council asked for a proposal to establish a Brexit Adjustment Reserve to compensate the member states and sectors hit hardest by Brexit, based on the member states’ trade with the UK and the fish caught in the UK exclusive economic zone. On 25 December 2020 the European Commission issued a proposal. Following approval by the European Parliament on 15 September 2021, the Council approved the proposal on 28 September, thus completing the legislative process.
The Netherlands can claim about €866 million under the Brexit Adjustment Reserve. The Netherlands is therefore the second largest recipient, after Ireland, of funds from the Brexit Adjustment Reserve.
Funds released from the Brexit Adjustment Reserve to the Netherlands are spent by the Netherlands Enterprise Agency (RVO). The funds are applied chiefly for the benefit of the business community and the fisheries sector. There are two compensation schemes and a trade programme for the business community. For the fisheries sector, the Ministry of Agriculture, Nature and Food Quality (LNV) is seeking to restructure the fishing fleet, to mitigate loss of income in the fisheries sector (the SIV scheme) and, via the VSB scheme, to compensate for vessels taken out of service because of Brexit.
The Minister of EZK informed the House on 14 March 2023 that approximately €280 million would be underspent on the General Business Scheme and the Trade Programme. These funds, which were provided for Brexit, will be added to the REPowerEU budget.
RePowerEU is the European Commission’s plan to end Europe’s reliance om Russian fossil fuel by 2030. The funds in question are to be spent under the Dutch plans for the European Recovery and Resilience Facility. These plans are intended to mitigate the consequences of the corona pandemic and were approved by the European Commission on 29 September 2023.
Mooi information:
- European Commission’s proposal for a decision Brexit Adjustment Reserve (26-12-2020)
- Breakdown of allocation Brexit Adjustment Reserve per Member State (PDF)
- Brexit Adjustment Reserve (BAR) - Information Rijksdienst voor Ondernemend Nederland (09-02-2022) (Dutch only)
- Kamerbrief over herverdeling BAR-middelen - Letter of minister of EZK to Parliament concerning reallocation of funds from Brexit Adjustment Reserve (14-03-2023) (Dutch only)
- REPowerEU at a glance: information by the European Commission
- Europese Commissie positief over gewijzigd Nederlands Herstel en veerkrachtplan - Press-release Ministry of Foreign Affairs on approval by European Commission of Dutch adjusted Recovery and Resilience Plan (06-10-2023) (Dutch only)
The European Court of Auditors published an opinion on the Brexit Adjustment Reserve on 1 March 2021. It pointed to the architecture of the Reserve, under which member states would receive an unusually high level of pre-financing without having to give the European Commission advance details of the measures to be funded. While this would allow for a swift reaction to an exceptional situation, the Commission would not be able to assess the eligibility and appropriateness of these measures before the end of 2023. The auditors warned that the proposed structure and timing would consequently increase the risk of sub-optimal and ineligible measures.
More information
- EU auditors highlight risks of Brexit Adjustment Reserve - European Court of Auditors advice on Brexit Adjustment Reserve (01-03-2021)
The National Audit Office, the audit office for the UK, published several reports between 2017 and 2022 on Brexit, such as:
Regulating after EU Exit. HC: 31, 2022-23 (18-05-2022)
Progress with trade negotiations. HC: 862, 2021-22 (08-12-2021)
The UK border – Post UK-EU transition period. HC: 736, 2021-22 (05-11-2021)
Learning for government from EU Exit preparations (PDF) HC: 578, 2019-21 (04-09-2020)
The cost of EU Exit preparations (PDF) HC: 102, 2019-21 (06-03-2020)
The UK border: preparedness for EU exit October 2019 (PDF) HC: 98, 2019-2020 (16-10-2019)
Implementing the UK’s Exit from the European Union: The Department for Exiting the European Union and the centre of government (PDF) HC: 593, 2017-19 (17-11-2017)
Weblog post by college member Ewout Irrgang, 22-07-2019
Brexit op herhaling (Dutch only)