- 87% of global financial services firms plan to establish or extend operations in the UK in 2022
- This is the highest since 2016 when financial services sentiment was first recorded; up from 50% in the spring of 2021, 45% in spring 2020 and 11% in the spring of 2019, before the pandemic hit
- 90% of global financial services investors think the UK will retain the same level of attractiveness or improve over the next three years, up from 75% in spring 2021 and 50% in spring 2020
- 87% of respondents said the UK offers the right environment for ESG investment
Almost 90% of global financial services investors are planning to establish or expand operations in the UK in 2022, according to EY’s latest UK attractiveness survey, representing the highest level of confidence since EY started attractiveness analysis*.
Sentiment around planned investment into UK financial services has risen significantly in recent months, increasing from 50% in last spring’s survey and picking up considerably on the low of 11% recorded in 2019 before the onset of the pandemic.
Financial services firms constantly review their operating models and strategies, but the COVID-19 pandemic has forced a wholesale reassessment of virtually every aspect of a company’s business, including its investment plans. Forty-one per cent of global financial services firms surveyed in November 2021 said that the pandemic has meant they are planning to increase their investment in the UK, with 8% planning a substantial increase. This is markedly higher than in the spring of 2021 when only 6% said they were planning on raising their UK investment level.
In addition, 90% of global financial services investors now think the UK will retain the same level of attractiveness or improve over the next three years, up from 75% in spring 2021 and 50% in spring 2020.
ESG a priority for investors, with large majority saying the UK offers the right environment
More than half (59%) of global financial services firms surveyed by EY said ESG was either the top priority or within the top three priorities of their board’s investment strategy, and only 3% claimed ESG was not on their priority list at all. Furthermore, 87% of respondents said the UK offers the right environment for ESG investment.
A country’s success in addressing the pandemic is key for investors deciding where to invest
Over half (54%) of global financial services firms surveyed said a country’s success in addressing the pandemic is currently the most important factor influencing investment location. Other key priorities for investors are the safety and security measures put in place to prevent a future major crisis, whether that be a health, environmental or cyber crisis, (38%) and the liquidity of capital markets and availability of capital (33%).
Anna Anthony, UK Financial Services Managing Partner at EY, comments: “It’s encouraging that such a high proportion of global financial services firms are currently looking to grow their business in the UK. This is testament to the stability and resilience of the mature UK market which continues to ably withstand the material challenges and uncertainty of both the pandemic and Brexit. As we look to the future of financial services, it’s also positive that investors see the UK as the right place for growth in ESG, which, post COP26, is a major and increasing focus for boards.
“As one of the oldest and most established financial structures with deep capital markets and an unrivalled regulatory system, the UK clearly has many unique selling points attractive to investors in both boom times and crisis. With investor confidence at such a high point, the key now is to avoid complacency and ensure, especially on green finance, that rhetoric is turned into action.”
Investors also want to see the UK government prioritise ‘levelling up’
Confidence in London as the chief location for new financial services investment into the UK remains, with 54% of global firms surveyed citing the capital as the most attractive UK region in which to establish or expand financial services operations – up from 31% in the spring of 2021. Scotland, perceived as the second most attractive region for financial services investment alongside the East of England, was down slightly with 13%, a decline from 15% in spring last year.
When looking at what the UK government needs to do to further improve the UK’s attractiveness, global financial services investors suggest prioritising geographic rebalancing of the UK economy by ‘levelling up’ (54%). This is followed by improving the skills levels of the UK workforce (28%), reducing corporate taxation levels (21%) and allocating investment that will accelerate the UK’s move towards reaching Net Zero (18%).
When considering investing regionally, outside of the capital, investors are looking for improvements in the strength of business networks (64%), better access to regional grants and incentives for investment/ R&D (46%) and more availability of business partners and suppliers (41%).
The digital economy remains an important driver of UK growth post-pandemic
Given the changes brought about by COVID-19, and the almost overnight move to remote working at the beginning of the pandemic, it is unsurprising that inward investors think the digital economy remains a key driver of UK growth. However, for FS investors, it has slipped from the top spot in April 2021 (cited by 54% of investors) to second place, cited by 51% of respondents in November 2021. Business / professional services is now seen as the primary growth driver, cited by 54% of investors, with financial services remaining in third place, cited by 41%.
Anna Anthony concludes: “The UK has been the top European location – and London the top European city – for foreign direct investment for over twenty years. While confidence levels have fluctuated, this latest investor sentiment survey shows that amid economic downturn and recovery, investors are reassured by the maturity and stability of the UK market. There’s a good deal to be positive about in the short term, and in the long term, if firms capitalise on the positive sentiment. In order for the UK market to do this, and further extend its attractiveness, it needs to broaden its service offerings around ESG, drive progress towards Net Zero, improve the skills levels of the UK workforce and demonstrate progress in the ‘levelling up’ agenda, so that more regions in the country benefit from what could be a boom in foreign investment and growth opportunities.”
Notes to editors:
*EY started tracking market attractiveness from 2001, with separate financial services investor sentiment recorded from 2016
About EY’s Attractiveness programme
EY’s Attractiveness Surveys analyse the attractiveness of a particular region or country as an investment destination. The surveys are designed to help businesses make investment decisions and governments remove barriers to growth.
- We have adapted our regular investor survey to provide more insight into the impact of COVID-19 on the perceptions and aspirations of investors into the UK.
- The most recent survey was conducted by Euromoney Institutional Investor. The survey was conducted by email in November 2021 and based on a representative panel of 40 international financial services decision-makers.