The Dutch business climate is not experiencing a temporary downturn, but rather a structural weakening. This is evident from the third edition of PwC’s Business Climate Heatmap. The Netherlands still ranks among the top tier internationally, but is losing ground year on year to the economic frontrunners of North-West Europe, whilst countries such as Portugal and Poland are strengthening their competitive position.
The heatmap shows that seventeen of the 27 countries surveyed have been making progress since 2013. “The Netherlands is falling in the international rankings not only because of its own decline, but also because other countries are rising faster. It is precisely those countries with which the Netherlands competes directly that are pulling further ahead,” says Barbara Baarsma, chief economist at PwC. The leading group consists of Switzerland, Norway, Luxembourg, Finland, Denmark and Sweden. Next comes the Netherlands, followed by – new this year – Ireland. The gap between our country and the top six has widened further since 2022, whilst other European countries, such as Portugal, Poland, Slovenia and Estonia, are gaining ground.
Weakening
‘The main explanation for the widening of the Netherlands’ gap is not reflected in indicators relating to labour costs, talent or innovation – areas in which the Netherlands scores above average. It lies primarily in indicators relating to the quality of institutions: administrative effectiveness, policy predictability and the quality of regulation.’ There are also countries that will have experienced an even sharper decline by 2025, including Belgium, Canada, Germany, the United Kingdom and the United States. Baarsma explains: “The Netherlands’ position, in seventh place, may seem strong, but competitiveness is not about where you stand today; it is about whether you are progressing faster than your competitors.”
Competitiveness requires adaptability
Veronique Roos-Emonds, chair of the board of directors at PwC Netherlands, also sees the results of the Business Climate Heatmap as a clear call to action for businesses. “It is precisely in a world of scarcity and uncertainty that strategic choices and execution become more important. The Business Climate Heatmap shows where the challenges lie, but also where opportunities are emerging. Companies that invest in productivity, innovation and resilience are better positioned to remain successful even in a changing environment. It is not the circumstances, but the ability to adapt that will increasingly determine who leads the way.”
Strengths
Despite this weakening, the Netherlands still possesses significant strengths, including a highly educated workforce, strong international connections, a high-quality digital infrastructure and a well-developed financial system. Baarsma: “The message from the Business Climate Heatmap is therefore twofold: the Netherlands still has strong foundations, but a good starting position is no guarantee for the future. If the Netherlands fails to resolve the structural bottlenecks, our traditional strengths will become increasingly less valuable.”
This weakening is actually affecting historic competitive advantages
It is striking that the greatest relative decline is occurring precisely in areas where the Netherlands has historically been strong. In the ‘Infrastructure and Physical Space’ category, the Netherlands fell from 9th place in 2013 to 15th place in 2025, partly due to issues surrounding the affordability and availability of housing, excessive nitrogen emissions and overcrowded (energy) infrastructure.
Business climate
In the Physical Security category too, the Netherlands slipped from first to fifth place over the same period. “Seven consecutive years of institutional decline represent a trend that cannot be attributed to a single government, a specific crisis or a temporary disruption. It points to a structural weakening of the government’s ability to provide the predictability, quality and capacity for implementation that businesses have been able to rely on for years. The economy recovered from the Covid-19 pandemic and the energy crisis, but the business climate did not recover with it,” said Baarsma.
The Netherlands is investing more, but getting less out of it
The heatmap also shows progress across various indicators, namely that our knowledge base is growing, that returns on R&D are increasing and that net incomes are rising. However, these improvements do not lead to a better business climate, as they are offset by rising costs, implementation problems within the government, a lack of physical and environmental space, and a shortage of growth capital.
Gap
“A growing gap is emerging between economic input and economic performance,” concludes Baarsma. “And the challenge is not that we don’t know what needs to be done, but that we are not doing enough to achieve it. Namely, resolving the well-known bottlenecks. This does not call for new plans, but for decisions and greater capacity to implement them.”
Source: PwC
Image by Gerd Altmann via Pixabay
See also: €72 million for the future of housing and infrastructure
Companies that invest in productivity, innovation and resilience are better positioned to remain successful even in a changing environment.Veronique Roos-Emonds, Chair of the Board of Directors of PwC Netherlands
