Since the UK’s decision to leave the European Union, there has been much speculation about the impact of Brexit on the City of London, Europe’s financial hub. However, the latest survey by EY on foreign direct investment (FDI) in financial services reveals a different story. Despite economic challenges and political uncertainties, the UK has demonstrated its resilience and attractiveness to investors in the sector. This article explores the key findings of the report and sheds light on the UK’s continuing strength in financial services.
UK’s Impressive Performance in Financial Services FDI
According to the EY analysis, the UK secured 76 financial service projects in 2022, marking a significant 17% increase from the previous year. This accomplishment is even more remarkable considering the economic downturn and political instability that characterized Westminster during this period. The UK’s ability to attract these projects translates to a 26% share of all European financial services FDI projects, consolidating its position as a leading destination for investment in the sector.
A major contributor to the UK’s success in financial services FDI is the increase in American investment. The UK was home to 21 US-backed projects, representing a quarter-on-quarter rise of 25%. This trend demonstrates that, despite the challenges posed by Brexit, investors continue to view the UK as the most attractive European financial services market. Anna Anthony, the UK financial services managing partner at EY, emphasized the importance of collaboration between the industry and the government to enhance the UK’s appeal further. Investments in programs promoting social mobility and upskilling local talent can play a crucial role in maintaining the UK’s competitiveness.
European Rivals’ Performance
While the UK maintained its lead in financial services FDI, its European counterparts faced varying fortunes. France experienced a decline of 25% in the number of projects recorded in 2022, securing second place with 45 projects. Germany and Spain closely followed with 31 projects each. These results highlight the UK’s continued dominance in the sector despite the challenges posed by Brexit.
Additional Insights from the Report
The EY analysis also highlighted other significant insights regarding financial services FDI in the UK:
- Creation of Jobs: Financial services investment projects resulted in the creation of 2,603 jobs in the UK, representing a 4% increase from 2021. This data reflects the sector’s ability to generate employment opportunities and contribute to economic growth.
- Preferred Destinations: Within the UK, London remained the preferred destination for financial services operations, followed by Scotland and Yorkshire & Humber. This concentration emphasizes the continued importance of London as a global financial centre.
- Future Expansion: Encouragingly, 69% of investors expressed their intention to establish or extend financial services operations in the UK within the next year. This indicates a positive outlook for the sector’s future growth and demonstrates the continued confidence in the UK’s financial ecosystem.
Despite concerns surrounding Brexit, the EY survey of financial services FDI in Europe provides compelling evidence of the UK’s enduring strength in the sector. With a significant increase in projects and a strong presence of US-backed investments, the UK remains the most attractive European financial services market. While challenges persist, the survey reveals a positive outlook for the UK’s financial services industry, with executives expecting the country to retain or improve its level of attractiveness in the coming years. The UK’s success in attracting investments and creating jobs underscores the resilience and global appeal of the City of London as a financial powerhouse.
(Source: Bloomberg)