Press release

22 Jun 2020 , 00:01 London, GB

UK retains top spot for Financial Services investment in Europe and is expected to outperform the Continent post COVID-19

The UK continues to be Europe’s most attractive location for international investment into Financial Services, with 99 projects recorded in 2019, according to EY’s latest UK Attractiveness Survey for Financial Services.

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Victoria Luttig

EY UK Media Relations Manager

Part of the UK PR team, focused on financial services. Covers all things to do with banking, insurance and wealth and asset management. Love sports and travelling. Married and mum of two boys.

Related topics Financial Services
  • Financial Services foreign direct investment (FDI) across Europe as a whole was down by almost 13% year on year in 2019
  • The UK attracted 99 financial services investment projects in 2019; more than double Germany, which came in second with 43
  • London was the top European city for Financial Services FDI, recording 67 projects in 2019; more than double Paris (29), which secured second place
  • The US is the leading origin of Financial Services investment in the UK, accounting for almost a third (32%) of all projects

The UK continues to be Europe’s most attractive location for international investment into Financial Services, with 99 projects recorded in 2019, according to EY’s latest UK Attractiveness Survey for Financial Services. While UK project numbers were down 11.6% from the year before (a drop of 13 projects), Financial Services FDI across the whole of Europe fell by 12.6% from 2018, when Europe saw a record number of Financial Services FDI projects driven by firms opening new offices or restructuring in preparation for Brexit.

The UK has consistently been the number one location for Financial Services FDI for the last twenty years, and 2019 was the third strongest year in the past decade for UK Financial Services. The UK registered more than double the projects of Germany, which came in second place with 43.

Future attractiveness post COVID-19

Looking ahead, as markets across the globe deal with the impact of COVID-19, investor sentiment suggests that the UK is expected to continue outperforming the rest of Europe in attracting post-pandemic Financial Services investment. Although sentiment is mixed, forty per cent of investors believe the UK will be more attractive for Financial Services FDI post COVID-19, compared to just 8% who believe Europe as a whole will be more attractive after the crisis¹.

Omar Ali, UK Financial Services Managing Partner at EY, comments: “The UK has again performed strongly on Financial Services FDI and, crucially, should remain in a good position to continue attracting investment this year, despite the challenges posed by COVID-19 and a weaker economy. 2018 saw record Financial Services FDI activity in Europe driven by the industry preparing for Brexit, so it was perhaps unsurprising that overall FDI projects in Europe and the UK dropped last year. However, 2019 levels were still the third strongest this decade and the UK has extended its lead over the rest of Europe despite Brexit, which is impressive. Financial Services remains one of the most important sectors supporting and driving economic growth in the UK, and it’s good to see that, thanks to the depth and breadth of our capital markets and the faith people have in our regulatory system, investors have confidence in the sector’s ongoing strength and resiliency.”

The UK extends lead over Germany

The UK maintained its share of FDI projects in Europe (edging up very marginally from 26.6% to 26.9%), and extended its lead over Germany, which had the second highest share of FDI and had been closing the gap in recent years. The UK attracted 99 Financial Services FDI projects in 2019 compared to 43 in Germany. In fact, the number of projects Germany attracted dropped by 38 year on year (with 81 projects recorded in 2018).

France, which has ranked third for the last five years, is now fourth behind Spain. France recorded 38 Financial Services projects in 2019, compared to 52 the previous year, while Spain recorded 40 Financial Services projects in 2019, up from 22 projects in 2018 and 6 projects in 2017.

Out of the 99 UK projects recorded in 2019, 72 were new projects and 27 were expansions. Fourteen were headquarter projects; 76 related to sales and marketing; 5 were R&D projects; 2 were logistics projects and 2 were related to shared services.

Cities: London remains the main centre for Financial Services investment

In the UK, London remains the most attractive destination for foreign direct investment in Financial Services securing 67 projects in 2019. This equated to 68% of all UK Financial Services FDI projects; down from 77% in 2018 but up from 60% in 2017. Scotland secured the second highest volume of projects – eight (six in Glasgow and two in Edinburgh). Yorkshire & the Humber recorded six projects in 2019 (double the total in 2018) moving it into third place; five of these six projects were located in Leeds. The North West recorded a decline in projects for the second year running and was ranked fourth. Despite London securing more than two thirds of all UK projects, in terms of employment, the largest number of jobs were announced in Scotland with 2,911 (London 806).

London also remains the dominant European city for attracting FDI for Financial Services with 67 projects. Paris is the second most popular city with 29 projects and Madrid third with 24 projects. Dublin attracted 23 projects and Frankfurt, 21 projects.

The year on year trends show that in 2018 Frankfurt had a spike in projects as many firms set up European operations in advance of Brexit (Frankfurt attracted 39 projects in 2018 compared to 21 in 2019). Paris and Dublin remain broadly consistent year on year (they attracted 33 and 22 projects respectively in 2018); and Madrid continues its growth in FS FDI (it attracted 15 projects in 2018 and 3 projects in 2017).

US remains key source of European FDI

The largest source of Financial Services investment into Europe in 2019 was again the US, which accounted for 27% of all Financial Services FDI – up slightly from 24% in 2018. The second largest source was the UK – contributing 19% of projects (68 projects in total).

In terms of investment just into the UK, the US again was the chief source, accounting for almost a third (32%) of all UK Financial Services FDI - equating to 31 projects. The largest investment projects in the UK were also from the US.

Australia and Germany were the joint second largest sources of Financial Services investment into the UK, with 8 projects each. The UK secured 38% of all German financial services investment projects.

What’s important for investors post COVID-19

As for what will influence investors’ future location choices, the liquidity of capital markets and availability of capital is ranked first. This is followed by the safety and security measures introduced to prevent a future major crisis (whether that be a health, environmental or cyber crisis).

Omar Ali concludes: “The COVID-19 crisis will of course impact all geographies and economies – whether to a lesser or greater degree – and no industry is immune. However, as one of the largest Financial Services hubs in Europe, the UK financial sector is well placed to support the recovery effort and drive growth. London’s dominance as the preeminent European financial centre remains unrivalled, and it’s also very encouraging to see other parts of the UK - like Scotland and Leeds - attract significant investment and create thousands of jobs. While it’s unclear at this early stage how future projects will be impacted by the pandemic, investor sentiment from April this year suggests UK Financial services is in a strong position to adapt to the changes and continue to be a leading destination for overseas investment.

“However, we should not be complacent. It is not by accident that the UK is a favoured market within Europe for FS investors – this is the result of decades of work to build and strengthen the sector and, with Brexit negotiations ongoing, this is a critical point in history for Government, regulators and the industry to come together to make sure the UK retains its position as a world-leading centre for Financial Services.”

 

Notes to Editors

¹ The responses derive from two surveys; one focused on the UK market and one on Europe as a whole.

About EY’s Attractiveness programme

The EY report examines the performance and perceptions of the UK as a destination for Financial Services FDI, and this year includes a survey of international investors looking at the impact of COVID-19 on investment into the UK and Europe as a whole.

European field research was conducted by the CSA Institute in January and February 2020 via telephone interviews. A second online survey for Europe, led by Euromoney, was conducted from 15 April to 29 April to reflect decision-makers’ perception changes due to the COVID-19 crisis. A final survey for the UK, by telephone and email, was conducted by Longitude from 10 April to 30 April to reflect decision-makers’ perception changes due to the COVID-19 crisis.

EY’s attractiveness surveys are widely recognised by our clients, the media and major public stakeholders as a key source of insight on foreign direct investment (FDI). Examining the attractiveness of a particular region or country as an investment destination, the surveys are designed to help businesses to make investment decisions and governments to remove barriers to future growth. A two-step methodology analyses both the reality and perception of FDI in the respective country or region. Findings are based on the views of representative panels of international and local opinion leaders and decision-makers.

The UK Attractiveness Survey is part of EY’s Economics for Business programme which provides knowledge, analysis and insight to help business understand the economic environments in which they operate, both in the UK and globally. We work with both the private and public sectors, facilitating the debate between business and government, supporting economic development, growth and regeneration. www.ey.com/uk/economics.