Press release

13 Jun 2022 London, GB

The UK remains Europe’s most attractive destination for financial services investment, but the gap with France narrows further

Financial services (FS) foreign direct investment (FDI) fell 2.8% across Europe in 2021, representing the third annual decline in succession

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Victoria Luttig

Manager, Media Relations, Ernst & Young LLP

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 (FS) foreign direct investment (FDI) fell 2.8% across Europe in 2021, representing the third annual decline in succession 

  • The UK bucked this trend, attracting seven more projects than the year before and recording a total of 63 in 2021

  • Europe’s 2nd most popular FS FDI location – France – also secured an increase in investment, attracting 11 more projects than in 2020 and recording a total of 60 projects in 2021 – its highest number in the last decade

  • The US remains Europe’s main source of FS FDI but France gets the lion’s share of US investment for the first time, with 19 projects compared to the UK’s 17 

  • In a survey of global investors, the UK came out as the most attractive European country for future FS investment, with Germany 2nd and France 3rd

The UK continues to be Europe’s most attractive location for international investment into financial services, according to EY’s latest UK Attractiveness Survey for Financial Services, attracting 63 projects in 2021 – an increase of seven projects from 2020. Europe’s second most popular FDI location, France, also secured an increase in investment, recording a total of 60 projects (11 more than in 2020) and narrowing the gap with the UK to just three projects.

Looking beyond the headline numbers, analysis of the FDI data shows that the UK secured a greater number of ‘new’ projects (as opposed to expansions of existing projects), which tend to involve higher levels of job creation. Out of the 63 UK financial services projects recorded in 2021, 54 were new projects and nine were expansions. France meanwhile attracted 35 new projects and 25 expansions.

While markets such as the UK and France saw an increase in the number of financial services investment projects secured, FS FDI across Europe as a whole fell by 2.8%, representing the third annual decline in succession. Germany, which for much of the past decade was the second largest recipient of finance projects, also reported a third consecutive annual decline, with project numbers falling from 81 in 2018 to 43 in 2019, 37 in 2020 and just 29 projects in 2021. Germany is now in fourth place behind Spain and its 39 projects in 2021.

UK is Europe’s most attractive location for future FS FDI

New investor sentiment data suggests that the UK is expected to continue attracting the highest levels of financial services investment in Europe. In a survey of global investors for EY – conducted between February and April 2022 – the UK came out as the most attractive European country for FS investment (backed by 67% of respondents). Germany came second with support from 42% of respondents, while France came third with 36%.

At a city level, London is seen as Europe’s most attractive destination for financial services FDI (backed by 61% of respondents), followed by Frankfurt (42%) and Paris (33%).

Global investors indicate FS investment into the UK is set to rise further this year

Over two-thirds (69%) of global investors said they plan to establish or extend operations in the UK over the next year. This is up from 50% in last year’s June survey. In addition, almost half (47%) of those surveyed said they were planning to increase their investment in the UK in the aftermath of the pandemic, up from 6% last year. 

Anna Anthony, UK Financial Services Managing Partner at EY, comments: “It is reassuring that at a time when global investment appetite and volumes are being heavily affected by multiple headwinds, and with FDI across Europe falling, the UK continues to see project growth and remains the continent’s most attractive financial services market. Six years since the EU Referendum, we can be confident that Brexit has not damaged the UK’s fundamental appeal, with its deep history in financial services and access to top talent. Investors clearly recognise that the UK continues to offer a unique environment for growth, innovation and progress. 

“That’s not to say the UK isn’t facing strong competition, and France in particular has narrowed the gap. But the UK secured a much higher number of ‘new’ projects, which typically create more jobs and higher levels of investment. Looking ahead, it’s encouraging that sentiment suggests increased investment in the UK. There is never a time for complacency, however, and the industry must keep a strong focus on doing all it can to attract investors to our shores.”

Cities: London remains the main centre for FDI but Paris is close behind  

London remains the leading UK and European city for attracting financial services FDI, securing 39 projects, one more than in 2020. However, this is the fourth lowest project count in the last 10 years (and less than half the 86 projects recorded in 2018). And Paris, in second place, is now just one project behind, securing 38 finance projects in 2021 (up from 21 the year before) – its highest number over the last 10 years. Third place was Madrid with 29 projects, up from 21 the year before when it shared second place with Paris. Dublin took the fourth spot with 10 financial services projects in 2021 (up from nine in 2020), overtaking Berlin which recorded nine (down from 11 in 2020).  

US remains Europe’s main source of FS FDI and France gets lion share for first time

The largest source of financial services investment into Europe in 2021 was again the US, which has been the case since records began. US investment accounted for more than a quarter (27%) of all projects. But for the first time, the UK was not the leading recipient of US investment, with France securing the highest number of US projects in 2021 (19). Meanwhile, the UK secured 17 projects – its lowest US intake since 2013. 

Omar Ali, EMEIA Financial Services Managing Partner at EY, comments: “Eurozone countries share a single market, but experience significant divergence when it comes to attracting financial services foreign investment. Over the last few years, Germany has seen overall investment levels fall, while France and Spain have seen theirs grow. France in particular is growing quickly, closing the gap with the UK, and even overtaking it in attracting the highest number of investment projects from the US for the first time. As the single biggest origin of FDI in Europe, what the US does and where it chooses to invest naturally has a big impact, and this is a significant shift. Looking to the future, the UK is still seen as the most attractive market, but there has been a swing to Germany, which takes second place ahead of France in sentiment – perhaps a little surprisingly given its last few years of decline. It will be interesting to see if this sentiment plays out in this year’s FDI numbers.

“European economies continue to face significant challenges from rising inflation, slowing economies and the likelihood of increasing interest rates with geopolitical uncertainty continuing to hang overhead. But the strength the eurozone demonstrated through the pandemic years continues, and the continent’s financial markets are weathering the storm with resilience and stability. This is the mindset European markets must maintain as they compete to attract future foreign investment and continue to challenge the status quo. Overall, healthy competition between European markets is positive: it should result in better outcomes for all and help to position the whole region as a globally competitive destination for financial FDI.”

Within the UK, Scotland drops to fourth place, while the West Midlands takes second 

While London was once again the top UK destination for financial services FDI, the West Midlands replaced Scotland as the second largest recipient of finance projects, securing six – its joint highest total for the decade. Northern Ireland secured five projects to come in third place, also its highest number for a decade. And Scotland, with three projects, came in fourth place (down from six projects in 2020 and eight in 2019); its lowest number since 2013.

As for the UK regions in which UK investors are planning to establish financial services operations, London came top with 56%, Scotland came second with 12% and the East Midlands third with 8%.

What’s important for investors post-pandemic

Looking at the top three areas of most importance to investors’ future strategies and location choices, the safety and security measures put in place to prevent a future major crisis (47%) was top, second was the quality of life, diversity and culture of the country (40%) and third was the country’s approach to managing the pandemic (38%).

According to the survey, the UK could improve its attractiveness by making progress on levelling-up (noted by 40% of investors), while 30% said improving social infrastructure and 28% said improving the skills of the UK workforce. In terms of the Government’s levelling up policy, 63% of investors said they would look to invest in regions where Government support was available.

In addition, 89% of global FS investors said, when looking where to invest, it was important that countries had strong sustainable climate policies in place.

Financial services is a key driver of UK economic growth

According to the global financial services investors surveyed, the top three drivers of UK growth in the coming years are the digital economy (top with 53% stating this), financial services (second with 47%), and business services (third with 31%). 

Anna Anthony concludes: “Countries and economies worldwide have faced unprecedented challenges over the past few years, first with the pandemic and now with high levels of geopolitical uncertainty; our financial systems have certainly been tested. They have stood firm though, supporting people and businesses through these difficult times, and will continue to do so. The UK’s strength, resiliency and track record in financial services have undoubtedly reassured many investors that the UK remains a safe and attractive place in which to invest. Current sentiment points to this not only continuing, but growing, ensuring that the UK remains a world leading financial services centre and Europe’s leading FS FDI location.”

Commenting on EY’s latest UK Attractiveness Survey for Financial Services, Minister for Investment, Lord Grimstone said: "The UK is a services superpower and a great destination for overseas investment. From being the most attractive European destination for future financial services investment, to bucking the trend seen across Europe of a decline in overseas investment, it's clear to see that our commitment to growing the economy is working.  

"This means cities such as London, regions like the Midlands and every part of the UK benefits from investment that creates high-value jobs, innovation and expertise and prosperous local economies.”

Notes to Editors

This latest survey shows investor sentiment remains positive for UK financial services, but recent geopolitical events and slowing global growth in the face of higher inflation could impact the outlook.

About the EY Attractiveness Report

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. A two-step methodology analyses both the reality and perception of FDI in the country or region.

The evaluation of the reality of FDI in the UK is based on the EY European Investment Monitor (EIM), the proprietary EY database, produced in collaboration with OCO.

We define the attractiveness of a location as a combination of image, investors’ confidence and the perception of a country’s or area’s ability to provide the most competitive benefits for FDI.

UK field research was conducted by Euromoney from 9th March 2022 - 10th May 2022, based on a representative panel of 88 international decision-makers across banking, insurance, wealth and asset management and FinTech.

European field research was conducted by Euromoney from 17th Feb 2022 - 6th April 2022, based on a representative panel of 33 international decision-makers across banking, insurance, wealth and asset management and FinTech.