KPMG Report commissioned by Dutch Ministry of Economic affairs issues warning on hard Brexit

The Dutch Ministry of Economic Affairs has published its view that a "hard Brexit" with no transitional period is a very serious and distinct possibility, presenting the worst case scenario for the United Kingdom’s withdrawal from the EU in March 2019.
  • Submitted 19 January 2018
  • Applicable Law UK , Netherlands
  • Topic Brexit

On an already stormy Thursday morning, the Ministry of Economic Affairs published its view that a "hard Brexit" with no transitional period is a very serious and distinct possibility, presenting the worst case scenario for the United Kingdom’s withdrawal from the EU in March 2019. The Government and entrepreneurs should assume that the "cliff edge" scenario is very real. The views and conclusions come on the back of an extensive KPMG report commissioned by the Ministry. The full report (in Dutch) can be found here.

The impact of Brexit is expected to be felt most by the estimated 35,000 companies that do business with the United Kingdom and have no experience with the trade with non-EU countries. Among those companies, there are 4,500 companies that export for more than €100,000 annually.

The costs resulting from new customs formalities can run up to €600m. On top of that, other costs will be added, such as custom duties, VAT and costs of other market-specific entry requirements.

According to the European Commission, the "no-deal" scenario would be logical, based on the British commitment and therefore the Netherlands must be prepared for such a scenario. The new regime for mutual trade will then apply as of 29 March 2019. With no deal only the general rules of the World Trade Organisation will apply for mutual trade, meaning that at least 4.2m new export declarations have to be made (based on the trade volume of 2016). The Government should make haste as well, since bottlenecks are likely to arise at the customs and inspection services. It will, however, be difficult to solve those bottlenecks, for the reason that there are insufficient people on the labour market who fit the job. In addition, the ferry terminals that account for a large proportion of flow of goods are not designed to function as an external border.

KPMG recommends the Dutch cabinet to make practical bilateral agreements with the British cabinet about the linking of customs systems and the automatic exchange of data. It is important to start in time with the reinforcement of inspections and the enforcement services. The policymakers in The Hague are, however, still studying the recommendations. According to the Secretary of Economic Affairs, Keijzer, the Dutch Government is willing to help, but the important work will come down the entrepreneurs themselves.

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