Brexit friction pushes UK companies to set up Dutch trade hubs

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While the UK government launches a search for Brexit opportunities, one group has already discovered them: Dutch warehouse owners.

An influx of British-based companies to the Netherlands has swelled as they struggle with the disruption of a customs border across the North Sea.

More than 90 investors have built or rented distribution space since 2017, half of them in 2021, according to government agency Invest in Holland.

They include Huboo, a logistics provider to online retailers. Martin Bysh, chief executive, said it had to act after clients deserted as Brexit negotiations went to the wire in December 2020. “We lost about 10 per cent of our revenue, which was clients leaving the UK for Europe,” he said. “It was a chaotic landscape.”

Boris Johnson’s government repeatedly said it was prepared to leave the EU on December 31 2020 without a trade deal as it haggled with Brussels. Eventually, an agreement for tariff-free, quota-free trade was clinched on Christmas Eve. But this introduced customs, food safety and tax controls after a year-long transition period.

“We didn’t know what to do, and there was almost no government advice,” said Bysh. Many smaller companies simply stopped supplying the EU because they could not understand the paperwork and worried they would be trading illegally, he said.

Martin Bysh: ‘The Netherlands is a great place to set up a business. They are ready to help and they sit next to so many key markets’ © Huboo

Huboo had already been looking to rent a warehouse in Germany but Covid-19 and bureaucracy had delayed the process. It switched to the Netherlands and by June 2021 its facility in Eindhoven, near the Belgian border, was operational with 40 staff.

“The Netherlands is a great place to set up a business. They are ready to help and they sit next to so many key markets,” he said.

The 32,000 sq m warehouse has more than 300 customers, including a growing number from the Netherlands. UK companies can send a pallet at a time, keeping stock there, rather than sending individual items direct from the UK to consumers, each one of which would require a customs form.

For companies that source their product in the EU, bringing it to the UK to send it back to the EU makes even less commercial sense.

Snag, which sells Italian-made tights and other clothes online, had to take a decision in July 2021 to accommodate growth: build a new distribution centre in the UK or in the EU, which accounted for about a third of sales. Tom Martin, chief executive, said he decided on the EU. “At that time there was still no trade deal and none was guaranteed. It was a great decision.”

Snag, which sells Italian-made tights online, realised it made little commercial sense to source a product in the EU, bring it to the UK, then send it back to the EU © Snag Tights

After assessing a number of countries, Snag chose the Netherlands, and found a warehouse in the town of Venlo near the German border. The corridor from the port of Rotterdam in the west to Venlo in the east is crammed with road, rail, and river traffic taking goods to and from warehouses.

“Germany is our biggest EU market and we can now ship there the next day,” Martin said.

Snag had a choice of premises but that has narrowed as more UK based and international businesses arrive. Staffing has also become an issue. The Netherlands has just 3.4 per cent unemployment.

It is also harder to hire temporary workers, vital in the ecommerce industry when orders peak before Christmas. In the UK agency workers are available almost on tap but the Netherlands has higher social benefits. “Wages for permanent staff are 10 per cent more than the UK. But temporary staff cost twice as much,” said Martin. Dutch employers also cover commuting costs. But he said it was still economic to operate there.

The Netherlands has long been a trading entrepôt, hosting Europe’s biggest port in Rotterdam, and using the Rhine river to shift products to and from the industrial heartland of Germany.

Since 2017 the amount of warehouse space at the port has doubled to 4mn sq m, or 400 hectares. “There is a lot of demand, and Brexit is one of the factors,” said Danny Levenswaard, director of break-bulk at the port. But he said many international companies also wanted “buffer stock” because of the disruption to supply chains caused by the pandemic.

The Netherlands has long been a trading conduit for imports and exports and uses barges to move cargo along the Rhine © Vasilis Ververidis/Alamy

Rotterdam, which had record container traffic of 15.3mn 20ft equivalents (TEUs) in 2022, was Brexit ready after updating its processing systems and educating traders.

Truckers, freight forwarders and customs agents must register with Portbase, a non-profit company, which pre-clears all cargo. The only checks are on food and animals, and when customs spots something suspicious. Brexit has increased the company’s workload by a fifth but it is manageable, said Marty van Pelt, business relations manager.

“We don’t have queues. The longest wait is four minutes, which is the time customs officers have to decide if they want to inspect something.”

But the number of UK customers has dropped from 367 to 300 since Brexit as many truck companies gave up on delivering to the EU because of increased paperwork.

Rotterdam itself has attracted 40 investments from companies with UK operations since 2016, said Roos Vermeij, the alderman responsible for the economy at the city council.

There is a dedicated council service for expats in English. Executives at foreign companies are welcomed at a red carpet dinner every year with the mayor.

Bysh of Huboo says many British entrepreneurs have now adapted to the new trading regime. He has opened distribution centres in Spain and Germany and is looking to expand in the Netherlands.

His latest innovation allows UK customers to list goods in euros on Bol.com, a big Dutch online retailer, with one click and he believes more midsized companies are ready to resume exporting.

“Once you are VAT registered in the EU and you jump through a few smaller hoops it’s not complicated [to export there],” he said. “And . . . so you might just think, well, this is a great opportunity. Let’s just do this properly and at scale.”

 

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