UK retains finance crown but France is catching up

Britain has retained its title as the most attractive destination for financial services investment, however, the gap with France has narrowed.

According to data from EY latest UK Attractiveness Survey for Financial Services, foreign direct investment (FDI) in financial services fell across Europe by 23% in 2020 as COVID-19 impacted business confidence and travel.

The UK attracted some 56 FDI projects last year, the highest in Europe, however, this was 43 lower than in 2019 before the outbreak of coronavirus. The fall marked the largest year-on-year decline in a decade.

The survey of global investors revealed that the UK also had the most investment friendly COVID-19 recovery plans, backed by 48% of respondents.

At a city level, London maintained its position as Europe’s most attractive destination for financial services FDI, backed by 44% of respondents, followed by Stockholm (19%) and Amsterdam (17%).

Within the UK, Scotland was the second most attractive region with six projects – its two main cities, Edinburgh and Glasgow, recording three projects each. However, Scotland also recorded a decline in 2020 – a fall of 25% – from eight projects in 2019.

The North West and Yorkshire & the Humber recorded three projects each in 2020, down from five and six respectively in 2019.

Read more: UK financial services firms continue to move jobs and assets to EU

France seized second place as Europe’s second most popular FDI location (with the largest source of financial services investment into Europe coming from the US).

France recorded 49 financial services projects last year. This was 11 more than in 2019, a rise of 29%, and narrowed the gap with Britain as it overtook Germany.

Germany, which had been second in 2019 with 43 projects, dropped to third place in 2020, with 37 projects. Spain, which took the third spot in 2019 with 40 projects, fell back to fourth place in 2020 with 31 projects.

Half of global investors said they planned to establish or extend operations in the UK over the next year, up from 10% in September 2020 and an increase on the 45% recorded in April 2020.

In addition to this, more than half (54%) of those surveyed said their investment plans in the UK were going ahead as normal despite COVID-19. This includes 6% of respondents who plan to increase their investment.

Of the 31% who said they were planning a decrease, the vast majority said it would only be a small cut.

Read more: UK firms 'told' to move to EU to avoid Brexit costs

“The UK has consistently been the number one location for international financial services investment since EY started tracking FDI levels and market attractiveness over twenty years ago,” Anna Anthony, UK Financial Services managing partner at EY, said.

“While its lead may have narrowed in 2020, most likely only short-term in response to pandemic-related business disruption and Brexit, investor sentiment suggests that the UK is looking to a strong future, and will continue to outperform the rest of Europe in attracting post-COVID 19 financial services investment.

“Investors have consistently been drawn to the strength and resilience of the City, its deep capital markets, gold-plated regulatory system and for the innovation and talent it offers. Despite the challenges of the last few years, the evidence points to this not only continuing, but growing in strength, ensuring the UK remains a world leading financial services centre.”

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