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The UK continues to be Europe’s most attractive location for foreign direct investment (FDI) into financial services, according to EY’s latest Attractiveness Survey for Financial Services.
The UK attracted 76 financial services projects in 2022, an increase of 13 projects from 2021, and has extended its lead over second-placed France, which secured 45 projects in 2022, 15 fewer than in 2021.
Financial services across Europe grew 5% from 277 projects in 2021 to 292 projects in 2022, outpacing overall European project growth, which only rose 1% during this period, impacted by the war in Ukraine, high energy prices and inflation.
The UK is now home to more than a quarter of all European financial services projects, having boosted its market share from 23% in 2021 to 26% in 2022.
In addition to the expansion of existing projects, the UK recorded a year-on-year increase in the number of ‘new’ financial services projects, which represents a new footprint for firms and is a recognised means of assessing a country’s investment dynamism and ability to attract fresh investors. Of the 76 UK financial services projects recorded in 2022, 68 were new, up from 54 in 2021.
Job creation linked to FDI also increased throughout Europe and the UK. Of the projects that disclosed headcount numbers, 2,603 jobs were created through financial services investment projects in the UK, representing a rise of 4% from 2021.
Anna Anthony, UK financial services managing partner at EY, said: “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.
“Of course, we can’t 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.”
London remains the leading European city for attracting financial services FDI, securing 46 projects in 2022, up from 39 in 2021. Scotland has held the second-placed region for financial services FDI for nine of the last ten years, with the exception of 2021. The third-placed region in 2022 was the North-West of England with six projects.
A global investor sentiment survey to explore future investment attractiveness of the UK also found that four in five investors (80%) think the UK will retain or improve its level of financial services attractiveness over the next three years.
Over two-thirds (69%) of investors said they plan to establish or extend financial services operations in the UK over the next year, the same as last year and up from 50% in the 2021 survey.
At a city level, 17% of investors reported financial services plans in Edinburgh over the next year and 14% in Leeds.
When looking specifically at the UK and how attractiveness could be further improved, investors noted that the Government should prioritise levelling up, enhancing the social infrastructure and expanding the skills levels of the UK workforce.
The largest source of financial services investment into Europe in 2022 was once again the US, with US-backed projects up 7%, from 74 to 79 projects. The UK was the leading recipient of US investment, securing 21 projects, an increase of 24%.
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% 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.
“As we look ahead, the eurozone economies are expected to bounce back by the end of 2023 and into 2024 and attract increasing levels of inward financial services investment.”
