Why the Netherlands Is Losing Its Competitive Edge in Europe
The Hague, Friday, 4 September 2026.
A new PwC report reveals a structural decline in the Dutch business climate since 2022, driven by seven years of falling government effectiveness and rising regulatory uncertainty.
A Systemic Decline in the Business Climate
On September 3, 2026, PwC Netherlands released its third Business Climate Heatmap, delivering a sobering diagnosis of the country’s long-term economic competitiveness [1]. The comprehensive analysis, which tracks the Dutch business environment from 2013 to 2025 across 67 distinct indicators, confirms that the current deterioration is a structural, non-cyclical shift rather than a temporary downturn [1]. While the Netherlands enjoyed a phase of steady improvement between 2013 and 2018, its business climate has deteriorated significantly since 2022, with no sustained recovery observed in the post-COVID-19 era [1]. Experts warn that without immediate intervention, the country’s traditional economic strengths will rapidly lose their value [1].
Seven Years of Institutional Erosion
The most critical driver of this structural decline is the continuous erosion of the country’s institutional quality [1]. Metrics evaluating government effectiveness, the rule of law, regulatory quality, and business policy have shown a continuous downward trend since 2018, representing seven consecutive years of institutional decline [1]. PwC Chief Economist Barbara Baarsma pointed out that this persistent trend cannot be attributed to a single government or a temporary crisis; rather, it reflects a systemic failure to provide the predictability and execution capacity that businesses rely on [1]. This institutional paralysis directly hinders the resolution of severe domestic bottlenecks, including capacity constraints in housing, nitrogen regulations, permit licensing, and the energy infrastructure [1][3]. These unresolved issues have sparked intense domestic debate, notably following the release of the Wennink Report, prompting business coalitions to demand that the cabinet treat economic investments as strategic future assets rather than simple expenditures [3].
Widening Gaps with European Peers
In an international comparison of 27 countries—including EU members, Norway, Switzerland, the United States, and Canada—the Netherlands ranked 7th in 2025 [1]. This puts the nation in the top 25.926% of the countries analyzed, allowing it to maintain its historical position within the top eight throughout the 2013–2025 period [1]. The country continues to benefit from strong fundamentals, such as a highly educated workforce, excellent digital infrastructure, robust international connectivity, and a sophisticated financial system [1]. However, the competitive gap between the Netherlands and the European vanguard is widening rapidly [1]. Since 2013, and particularly since 2022, the country has lost ground to leading economies like Switzerland, Norway, Luxembourg, Denmark, Finland, Sweden, and Ireland [1]. Meanwhile, fast-developing nations like Poland and Portugal are actively closing the gap, threatening the Netherlands’ position in the European economic hierarchy [2]. Baarsma has described this gradual loss of competitive edge as a “crisis in slow-motion” [3].
Decoupling Growth and Building Resilience
To navigate this environment of high uncertainty and persistent scarcity, PwC advises companies to fundamentally adjust their operational strategies [1]. Veronique Roos-Emonds, Chair of the Executive Board of PwC Netherlands, noted that in a world increasingly defined by resource constraints, an organization’s ability to adapt will ultimately determine its success [1]. Because labor scarcity is projected to remain a permanent fixture of the Dutch economy, businesses are urged to decouple their growth from headcount expansion [1]. Instead, companies must drive productivity through targeted investments in artificial intelligence (AI), robotics, and enhanced management practices [1]. Additionally, to insulate themselves from geopolitical tensions and supply chain disruptions, enterprises must build structural resilience by diversifying their supplier bases, reducing dependence on single markets, and significantly increasing their investments in cybersecurity [1].