Updated: Jan 27, 2022
On November 15, Royal Dutch Shell (RDSa.L) announced a simplification process and corporate overhaul, which includes scrapping its dual share structure and moving its headquarters to London. According to the company, the main reasons behind this decision are the Dutch government’s pressure regarding climate targets as the giant progresses to clean energy, and the Netherlands’ 15% dividend tax which also affects the British shareholders.
While some Dutch politicians state the company’s move is good for the country’s ambitions, most of them do not agree. The conglomerate’s mere existence, combined with others--such as Unilever--was generating significant attraction to the country and trust for its financial system & job market. As conglomerates leave the Netherlands one by one, many start questioning the competitiveness of the Netherlands.
Motivations Behind Shell’s Move
Royal Dutch Shell and the government of the Netherlands have been holding talks regarding the country's 15% dividend withholding tax on some of its shares, making them less attractive for international investors. The same tax is also the reason why both publisher Relx (previously Reed Elsevier) and consumer goods giant Unilever moved their headquarters to London and scrapped their dual share structures. Including Shell, all three companies are listed under FTSE100 in London, previously traded as both Dutch and British companies.
Shell being the third Anglo-Dutch company on FTSE100 to prefer London over Den Haag will move some rocks on the Dutch side. The new structure means that all shares will be British and the Dutch tax will be lifted from all of the affected shares. This explains Shell’s behind-the-scenes motivation for the decision: playing the cards to attract more investors and keep existing ones happy.
Huge Backlash from the Dutch
As academics are scrambling to tell people how the job market, GDP, and industry attraction will be affected, the opinion of the Dutch public is slowly shaping. Politicians are already commenting on the news: “unpleasantly surprising,” says the outgoing minister of Economic Affairs Stef Blok. The company will lose “royal” status after nearly 130 years of being called the “Royal Dutch Shell”.
Prime Minister of the Netherlands, Mark Rutte, is reportedly preparing a proposal to keep the company from leaving. Sources report that the Dutch government plans to grant a 15% tax cut over the dividends. This “grant” will not only be for Shell but for all the companies the tax previously (and still) applied to. It should also be noted that this dividend tax was also the reason why Unilever moved its HQ to London.
Therefore, it is possible to state that the decision does not only receive backlash from the Dutch politicians and public but also provokes an urge to keep big businesses within the country. The talks to abolish the tax were being held for years, but Shell’s decision forced the government to shift the gear. On the other hand, the Dutch are still unable to form a government after the last elections, which makes the public question the government's ability to abolish the tax after all.
It also needs to be underlined that Shell’s shares will still be “traded” in Amsterdam, as well as New York. However, the company will not have two separate overarching legal headquarters and two primary listings.
London’s Post-Brexit Comeback as the Financial Hub
As the Dutch are devastated with the news, British politicians and people of influence are celebrating the decision. Shell’s decision is a “clear vote of confidence in the British economy”, as Kwasi Kwarteng, the business secretary, claims. Following the business secretary’s claims, it is possible to say there is a pattern of Anglo-Dutch companies picking London over Den Haag.
Although a generalization without further investigation on this topic would be wrong, this could also imply that the British economy is gaining its competitiveness back after Brexit’s damage. On the other hand, there are clashing opinions on this matter as well. “One doubts Shell’s directors spent any time pondering the state of the UK economy. It’s really a question of Anglo-Dutch multinationals’ frustration with the Dutch system of applying a 15% withholding tax on dividends,” says The Guardian’s Nils Pratley. According to Pratley, it is a misjudgment to take Shell’s call as “preferring London”. According to him, this is just a business decision to drive profits and dividends up even more, no matter if there is a cultural side to it or not. “The political noise will be intense, not least because of the symbolism of Shell shedding the ‘Royal Dutch’ part of its name after 114 years,” adds Pratley.
Implications for the Dutch Economy and More
There are certainly more news and developments yet to come regarding the Shell move to London. With the coronavirus pandemic’s end still not in sight, increasing climate change pressure, and economic instability in China and the US, companies are trying to keep their investors happy and make business decisions accordingly. On the other hand, it can easily be said that for multinational conglomerates, business does not look good in the Netherlands as long as the 15% dividend tax is there.
Although top-level, executive jobs will be moved to London, others will be safe in the Netherlands. The company will keep operating in its Amsterdam and Den Haag offices, just not as its headquarters. This means that direct job cuts will not happen, or at least not enough to concern the job market. On the other hand, Shell’s decision has a very significant indirect effect. As one more giant leaves the country, Dutch job market may lose its attractiveness for top talent. Therefore, it may be said that Shell’s decision potentially has a low impact on the job market in the short term, while creating significant damage in the long-term.
The company’s decision is significant for the Netherlands and the EU in their competition to beat London as the financial center of Europe. Furthermore, Shell’s cultural importance for the Dutch is not to be taken lightly. Although the company’s operations are often criticized (oil leaks, bad faith, etc.) it was still a “Royal Dutch” company.
Written by Baturalp Artar, Amsterdam Chapter of European Horizons
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