The Dutch capital’s internationalism, tax breaks and fertile start-up scene make doing business in Amsterdam an attractive option for UK firms seeking an overseas foothold. Experts and business leaders discuss opportunities in the Venice of the north
Amid the hasty predictions of London’s decline in the wake of the Brexit vote last June, the New York Times ruminated on the city most likely to inherit the mantle of Europe’s financial capital. Would it be Frankfurt with its ‘Mainhattan’ skyscrapers and enviable position in Europe’s largest economy? Paris with its financial services? Or maybe Dublin with its tech talent and low corporate tax rate?
No, according to the US daily, it would be Amsterdam – that irrepressibly genial city known for its pretty canals, progressive-minded, two-wheeling locals and party-till-dawn nightlife. While rumours of London’s demise have been greatly exaggerated, this relatively small Dutch metropolis of just 780,000 people has indeed been punching above its weight in global business for some time. It hosts the European headquarters of zeitgeisty tech disrupters such as Netflix, Tesla and Uber whose offices sit cheek by jowl with home-grown successes such as Booking.com, Guerrilla Games and WeTransfer. Mitsubishi UFJ Financial Group, the Japanese bank holding company, plans to relocate some staff from London as it expands its Amsterdam office in the year ahead. Meanwhile, the buoyant start-up scene hatches innovative firms on a monthly basis. “This activity is a magnet for British companies with plenty of opportunities in the supply chain,” says Michiel Veldhuizen, country director, Netherlands at the UK’s Department for International Trade.
“Amsterdam is perfect for British companies to take the first steps to see how they can scale internationally,” adds Anton Valk, chairman of the Netherlands British Chamber of Commerce [NBCC]. “Everybody speaks English, there’s an open market and it’s easier to do business there than, say, France. It’s ideal for getting some international experience before focusing on bigger countries like Germany.” As Valk suggests, one of Amsterdam’s biggest draws is its bilingual workforce. Ninety per cent of Dutch people speak English (a higher percentage than Canada), with the chair of the Netherlands IoD branch, Ilse van den Meijdenberg – also director of Dutch-based translation company English Services – noting that UK businesspeople complain about “trying to practise Dutch but they only want to speak English with me!”
But these impeccable English skills means many foreign companies fall into a trap of assuming business will go as smoothly as it does at home. “Many start-ups don’t realise it’s important to get contracts translated into Dutch – they’ll make do with a Google Translate version,” says an aghast van den Meijdenberg, who also urges British firms to check legal documents for ‘Dunglish’ (Dutch-English) and to have a Dutch-language website, as “people like to understand what they’re buying and read it in their native language”.
Amsterdam’s history as a global trading centre has also bequeathed its citizens a cosmopolitan outlook, reflected in its globally curious talent pool. As Callum Thomas, founder and chief executive of recruitment company Thomas Thor (see case study, below), notes: “Dutch people prefer doing international business to Dutch business.” This non-parochialism is mirrored by Amsterdam’s standing as a transport hub. Europe’s largest port, Rotterdam, is nearby, while Schiphol airport offers more than 100 daily flights to the UK, with its chief executive cheekily calling it “Heathrow’s third runway” (though travel times from Humberside or Aberdeen on KLM are even shorter).
For exporters, the willingness of the famously tolerant Dutch to try new products, married with high household consumption – which grew 2.7 per cent to October 2016 – presents considerable opportunities especially in the food and drink sector. “If you go into any Dutch supermarket, you will see a huge variety of British food and drink products such as craft beer from the Lake District or cereals from Dorset, many tied to trends for healthy living,” says Veldhuizen. “A company like Dorset Cereals does well because of innovative packaging – they have a very British style of design that appeals here.” However, he urges UK businesses to make their offering as accessible as possible to Dutch customers: “If you’re exposing yourself to Dutch consumers through a website or social media, make sure you can be contactable by Dutch phone numbers and that you have Dutch payment facilities on your website.”
City of start-ups
According to van den Meijdenberg, the Dutch love of new trends “makes it difficult for more traditional companies to be successful”. Indeed, Marks & Spencer closed its stores in the country last year. However, Amsterdam lures start-ups with low costs for setting up (minimum price: €50 – around £42.50) and easy access to funding (last year Dutch start-ups received €500m of funding from pension providers ABP).
Many start-ups work in affordable incubators such as Makerversity, founded by young British entrepreneur Tom Tobia in April last year. Keen to expand from his original Somerset House hub in London, he gained funding from the Dutch Lottery’s Doen Foundation. Today, Makerversity Amsterdam is the city’s largest ‘making space’, hosting a hive of innovative businesses including 3D printing, ‘hackitarians’ and start-ups manufacturing WiFi birdhouses. Tobia opted for Amsterdam over more established start-up scenes in Berlin or Barcelona because, “they didn’t have the nuts and bolts of product design and technical engineering, which is second nature in the Netherlands. Plus, Amsterdam is so densely populated, therefore space is at a premium. It makes it difficult for new start-ups to get their own studio.”
Another enticing aspect of working in Amsterdam is its incentivising tax breaks. The corporate tax rate of 25 per cent is lowered to 20 per cent for a company with income below €200,000. The Netherlands has dual tax treaties with nearly 100 countries, with tax rates lowered on profit and no withholding tax on royalty payments to either local or foreign recipients. “If you’re an expat, you get tax breaks for 10 years,” says Thomas. “Plus, you don’t pay corporation tax on repatriated profits. Much of our business is in the Middle East. We make a profit on this business in the UAE but we pay no tax on it in Holland.”
Such tax benefits also make the Netherlands an attractive place for multinationals to site holding companies, leading to inevitable accusations of encouraging tax avoidance. In 2015 the European Commission ordered its government to recover €20m–€30m (then £14m–£21m) in back taxes from Starbucks, whose Amsterdam-based European HQ had paid less than one per cent corporation tax.
Meanwhile, the Netherlands’ reputation for radical progressiveness also extends to its economy. The city of Utrecht will imminently begin experimenting with a ‘basic income’, where small groups of recipients can get up to €972.70 a month whether they work or not. The aim of the scheme is to target ‘revolving door’ workers – people forced into jobs by the employment system, but who often walk straight back out again.
In the workplace, things are equally egalitarian. The Netherlands has the industrial world’s shortest working week (averaging about 29 hours) plus reformist employment protection laws – employers entering the country should be aware of their obligation to pay long-term sick staffers 70 per cent of their pay for two years. “Benefits are excellent here, but expensive,” one business leader tells Director. “I’ve got my own business and am terrified of taking on more staff because of the protection… If somebody plays football at the weekend and breaks a leg, you have to pay them [health benefits]. Because the welfare system is so good and workers so well protected, you think twice about taking people on.” To sidestep this, the leader says, many foreign companies employ a pool of ready freelancers.
In business, the Dutch penchant is for consensus – the word for consensus decision making is poldermodel, said to originate from the time when townsfolk would cooperate to build dykes to keep the sea out of low-lying ‘polder’, or land – which does mean business deals are rarely signed on lightning-quick 12-hour visits. “The Dutch tend to have lots of meetings which can go on forever and never really make decisions,” says van den Meijdenberg. “British companies tend to get annoyed or frustrated… If you expect to go into a meeting and get things done, things can go wrong.”
Tobia agrees: “For a nation of confident and articulate people, they can seem reticent to commit to things, even if it’s minor. When you meet Dutch people you sense they are go-getters and risk-takers but they carefully consider things before coming to a complex decision.”
Meanwhile the New York Times’s prognosis that Amsterdam may usurp London as a financial centre shows no sign of coming to fruition just yet. “The scenario of a wholesale exodus of British businesses to mainland Europe is definitely not happening,” says Veldhuizen.
All the same, Amsterdam’s easygoing milieu makes it a relatively hassle-free destination for British companies considering dipping their toes into currently murky European waters. “What makes British companies succeed here is building relationships with Dutch clients, investing time to visit and becoming part of their sector’s eco-system,” says Veldhuizen. “The ones who only get a list of potential distributors and partners and just invest with a few cold calls don’t get anywhere. Holland is a place where it’s very easy to do business – we all speak English, have a transparent tax system and one of Europe’s most internationally focused economies. Be prepared for that and you’ll do well here.”
Case Study: Thomas Thor
Described by founder Callum Thomas (pictured) as “the go-to company if you’re hiring in the nuclear industry”, recruitment organisation Thomas Thor started life in Amsterdam in early 2010. Although the Dutch city is hardly known as a nerve centre for the nuclear sector, Thomas selected it due to its favourable travel connections. “Our client base is in Europe and the Middle East – we travel a lot and it’s easy to get everywhere from Schiphol, rather than travelling to a London airport which is a nightmare,” he says. Its internationalism also appeals. “The first language after Dutch is English, plus there are many international people who come here for life, as well as work – it’s a good place to hire,” he says.
Deciding to self-fund the nascent company, Thomas found an English-speaking lawyer and opened bank accounts and premises: 18 months later, the company had scaled sufficiently to move into their covetable canalside Negen Straatjes (Nine Streets) location, helping direct nuclear experts towards freelance contracts or staff roles. Thomas Thor also has a roster of retirees, whose knowledge and expertise is appreciated in an industry facing a critical skills shortage. Since launching, it has opened an office in Abu Dhabi and its coffers have grown (current turnover is €15m, or £12.7m) along with its headcount. It currently employs 40 staff – up from just three in 2010 – comprising 15 different nationalities (only three members of staff are Dutch). “We set up in Amsterdam to do business with Europe and the rest of the world, rather than Holland,” says Thomas. “For global businesses it’s a really good option.”