The UK will however no longer take part in policy-decisions nor will it be represented in the EU’s political institutions, such as the European Commission and Parliament. Set to end on December 31st, 2020 the transition period will determine future trade relations between the UK and the EU, depending on the outcome of the negotiations between the two parties. While the transition period allows for the possibility of an extension phase, if this is agreed upon by the end of June 2020, British prime minister Boris Johnson has already indicated he does not wish to entertain the possibility.

Accordingly, if no trade deal has been negotiated by the end of the year, the UK could face tariffs on exports to the EU and vice versa, in accordance with WTO terms. These are grim prospects for many British companies present on the European market as well as for foreign multinationals and transnational corporations headquartered in the UK with activities and offices in the EU. Their main concern is that, in the event of a hard Brexit and without a free trade agreement between the UK and the EU, WTO tariffs between the two markets could potentially hurt their activity in the region.

In October 2018 Panasonic announced it would move its European headquarters from its UK location to Amsterdam, a move mirrored by Sony in January 2019. Far from being isolated cases, according to the Netherlands Foreign Investment Agency (NFIA), over 140 companies have already decided to establish their activities in the Netherlands since the Brexit referendum in June 2016, due to the uncertainty surrounding Brexit. In 2019 alone, over 70 companies did so, among them are media companies Discovery and Ridley Scott Creative, credit rating agency AM Best and Japanese pharmaceutical company Shionogi. This trend has and continues to benefit the Dutch economy and accounts for the creation of more than 4200 direct jobs and €375 million in investments in the first three years.

Germany has experienced a similar boost in business activities due to Brexit. According to Germany Trade & Invest (GTAI), between June 2016 and 2018, the number of British firms located in the country has increased by 34%, with over 168 British firms relocating or expanding their activities to Germany in 2018. Most notable was Tesla’s decision to locate its new and only European factory in the country’s capital. The company’s CEO, Elon Musk has voiced his concerns over Brexit and cited it as a factor in Tesla’s decision to build its factory in Berlin rather than in the UK.

Europe’s financial industry also saw Brexit-related growth in 2019. Luxembourg especially, benefited from Brexit related relocations, as more than 60 financial institutions have selected the Duchy as their new home according to a report published by Luxembourg for Finance earlier this year. According to the report, a further outcome of Brexit has been the shift to Luxembourg Law by several European institutions active in financial markets. The European Commission acting on behalf of the EU and the European Atomic Energy Community (EURATOM) advanced a new legal framework of its debt insurance programme (DIP) subject to Luxembourg law. One of the world’s leading debt issuers, the European Stability Mechanism (ESM), also decided it would exclusively use Luxembourg law from now on, alongside the European Investment Bank (EIB), which announced its intention to move from English to Luxembourg law for its lending activities.

Luxembourg is fast becoming a strategic location for the finance sector and an EU hub for businesses in the wake of Brexit, a thought echoed by Luxembourg for Finance CEO Nicolas Mackel.

On a similar note, the legal industry has also been witnessing significant changes and adjustments. Many law firms have been opening offices, hiring new partners and rethinking their strategies to outweigh prospective consequences of Brexit. While Hausfeld recently announced the opening of its Amsterdam office, other firms, including Dentons, Greenberg Traurig, Eversheds and Baker McKenzie have been expanding their offices in the city. The boost Amsterdam’s legal sector is currently experiencing reflects the previously acknowledged influx of businesses in the city caused by Brexit uncertainties. As more and more businesses are likely to relocate not just to the Netherlands but to other parts of the EU as well, law firms are sure to follow. Firms in other European cities, such as Brussels, Paris and Vienna have already been following Amsterdam’s lead, suggesting that both legal and business players are slowly adjusting to post-Brexit European markets.

As uncertainty persists one month on from Brexit, it remains difficult to predict how the situation will play out, yet many European cities are already in line to supplant The City, London’s finance district and up until now Europe’s financial services centre. The race to become Europe’s new finance hub is on.

Coline Choraine