The UK offers the right environment for sustainable finance investment
For the first time, investors were asked how important ESG issues were to their board’s investment strategy. The pandemic has driven an increased spotlight on sustainable finance and climate change risk, and this came through in the survey results. Almost two thirds of financial services investors (59%) said that ESG was either the top priority, or within the top three priorities of their board’s investment strategy. Furthermore, it was very encouraging to see that such a high majority (87%) believe that the UK offers the right environment for their ESG investment. The survey results are an indicator of market sentiment and highlight that financial services firms must continue to prioritise this agenda, if not quicken the pace to turn all the rhetoric into reality. This will help to ensure that the sector is at the forefront of tackling sustainability and climate change risk, and offers the right breeding ground for ESG investment.
Geographic rebalancing of the UK economy is more important than ever
Confidence in London as the main recipient of new FS investment has increased, with 54% of financial services firms citing the capital as the most attractive UK region in which to establish or expand operations – up from 31% in April 2021. However, alongside this, the survey recorded a sentiment dip on the regions outside of London, including Scotland which dropped marginally from 15% last April to 13% in November 2021. Whilst London’s ongoing success should be noted, these results indicate that there is much more work to be done from a UK-wide perspective to ensure more of our towns and cities also capture the benefits of incoming FS investment. ‘Levelling up’ is a key focus for financial services firms, and over half of investors (54%) believed that it should be a domestic policy priority for the UK Government to improve the country’s attractiveness in the future.
Business services is now seen as the biggest growth driver in the UK by global financial services investors, and has overtaken the digital economy, which now moves into second place. The financial services sector retains its third-place ranking, a position it has held since 2020.
The pandemic has shifted financial services investor priorities
Across the seven-month period between the two surveys, financial services investors reassessed the factors that would influence them to select the UK or another country for their investment. Given the ongoing impacts of COVID-19, investors are increasingly focused on how governments are responding to and managing the economic effects of the pandemic. Just over half of investors (54%) said that a country’s level of success in addressing the effects of the COVID-19 pandemic is the most important factor when selecting a future location choice (up from 33% in April 2021). The second biggest investor priority is the safety and security measures put in place to prevent a future major crisis – whether that be a health, environmental or cyber crisis (named by 38% of investors, and up from 27% in April 2021). The third priority is the liquidity of capital markets and availability of capital, which has doubled in investor importance from 15% in April 2021 to 33% in November 2021. Perhaps this reflects the difficulties that investors have faced as the global market has been subjected to the economic hardships of the pandemic.
The UK remains well-positioned for continued growth in financial services
These latest sentiment survey results clearly indicate that the UK is seen as a mature and established financial services market – and one that is offering a market-leading environment for ESG investment - which can be relied upon in times of heightened uncertainty and instability. But the country is facing strong competition from other markets and so, whilst the industry has weathered the effects of the pandemic and Brexit remarkably well, it’s crucial that, going forward, the UK keeps pushing to raise the standards on ESG, improve the skill levels of its workforce and prioritise the 'levelling up' agenda. These will help ensure that it maintains its leading position on the global stage and does not lose ground once uncertainty subsides and the economic recovery reaches new highs post the COVID-19 pandemic.
