UK financial services 'still dominate Europe'

Fears that Brexit would lead to an exodus of jobs and investment from the UK's financial services have again proved unfounded with the latest, continent-wide survey of foreign direct investment (FDI) in the sector showing that the nation remains by far the most attractive destination in Europe.

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EY’s latest Attractiveness Survey for Financial Services found that the UK attracted 76 financial services projects in 2022 – an increase of 13 projects on 2021 – while second-place France secured 45 FDI projects, a decrease of 15 on the previous year.
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London remains Europe's top financial services FDI destination post-Brexit

The UK has topped EY's annual FDI survey of financial services every year since the Brexit vote in 2016, with London topping the European city table since it was first compiled 37 years ago.Chris Hayward, policy chairman at the City of London Corporation, told City AM: "London continues to lead Europe in attracting foreign direct investment in financial services, and the sector is proving resilient despite the global challenges facing the UK economy.“That is good news for every household, because a strong City creates the wealth and jobs that support the economy and fund our public services."Andrew Griffith, economic secretary to the Treasury, added: “We have a tremendous track record of attracting the brightest and best companies in the world built on the long-standing competitive advantages of the UK and its attractiveness as a place to do business.”The survey found that the number of FDI projects in the sector increased by five per cent across Europe last year, to a total of 292. Germany and Spain tied for third place in the list of most attractive nations, with 31 projects each.EY said that the UK had now become home to more than a quarter of all European financial services FDI projects, having boosted its market share from 23 per cent in 2021 to 26 per cent last year. By comparison, France secured 15 per cent of Europe’s projects, with both Germany and Spain getting 11 per cent each.

UK outperforms competition to remain attractive financial services market

Anna Anthony, UK financial services managing partner at EY, said: “The strength of the UK financial market has meant that – even through challenging times – investors see it as the most attractive European financial services market."A lot has happened in the seven years since the EU referendum, and the UK has faced strong competition from its closest competitors. Our research shows that investors recognise the strength, gold-standard governance and resilience of the UK’s financial system and see it as the preferred destination for growth, innovation and access to top talent."However, Ms Anthony said the UK could not afford to be complacent. "Industry and government focus on raising market attractiveness is key and should align with what matters to investors – such as levelling up, enhancing social infrastructure and upskilling local talent – to ensure UK financial services retains and continues to extend its leading role on the global stage.”

Europe-wide data also encouraging

The survey also found that job creation in the sector linked to FDI also increased throughout Europe and the UK last year. The report said that, of the projects that disclosed headcount numbers for both new and existing projects, 2,603 jobs were created in the UK, a year-on-year rise of four per cent.Across Europe, the disclosed number of jobs created from new and existing projects rose by a fifth, from 8,948 in 2021 to 10,708 in 2022, led by France with 1,734 new positions. Omar Ali, EMEIA financial services managing partner at EY, said: “Despite significant geopolitical and economic challenges facing markets over 2022, financial services FDI across Europe rose and the region recorded a 20 per cent year-on-year rise in related job creation."This speaks to the underlying capability, expertise and skills found in Europe’s financial centres, and demonstrates sustained confidence from global investors even in turbulent times. While the UK continues to lead Europe on the number of projects, the eurozone’s major markets are performing strongly – France and Germany, in particular, attracted big banking projects in 2022."In a survey of UK-based international decision-makers across banking, insurance, wealth and asset management and FinTech – conducted for EY by Euromoney – 80 per cent believed the nation would retain or improve its level of financial services attractiveness over the coming three years.More than two-thirds of investors said they planned to establish or extend financial services operations in the UK over the coming year (up from half last year) with London remaining the most attractive UK region for FDI, followed jointly by Scotland and the East of England."The key UK regions in which investors are planning to establish or extend financial services operations over the next year are London (41 per cent – down from 56 per cent in 2022), followed by Scotland (14 per cent – up from 12 per cent in 2022), and Yorkshire & Humber (10 per cent – up from three per cent in 2022)," said EY."At a city level, 17 per cent of investors reported financial services plans in Edinburgh over the next year and 14 per cent in Leeds."The largest source of financial services investment into Europe last year was, once again, the US, with American projects up from 74 in 2021 to 79 last year. 

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