The UK continues to be Europe’s most attractive location for foreign direct investment (FDI) into financial services, according to EY’s latest Attractiveness Survey for Financial Services. The UK attracted 76 financial services projects in 2022 – an increase of 13 projects from 2021 – and has extended its lead over second-placed France, which secured 45 projects in 2022 – 15 fewer than in 2021.
Germany and Spain tied in third place, both recording 31 financial services investment projects in 2022. Germany’s gain of two projects from 2021 is the country’s first annual increase in financial services projects since 2018, when it recorded 81 projects in the sector. Spain’s 31 projects were down from 39 in 2021.
Financial services FDI across Europe grew 5% from 277 projects in 2021 to 292 projects in 2022, outpacing overall European FDI project growth, which only rose 1% during this period, impacted by the war in Ukraine, high energy prices and inflation. The UK is now home to more than a quarter of all European financial services FDI projects, having boosted its market share from 23% in 2021 to 26% in 2022. By comparison, France secured 15% of Europe’s financial services FDI projects, and both Germany and Spain each secured 11%.
UK bucks Europe-wide trend with significant number of ‘new’ projects and headcount rises across the region
In addition to the expansion of existing projects, the UK recorded a year-on-year increase in the number of ‘new’ financial services projects, which represents a new footprint for firms and is a recognised means of assessing a country’s investment dynamism and ability to attract fresh investors. Of the 76 UK financial services projects recorded in 2022, 68 were new, up from 54 in 2021. This was in contrast to the major eurozone markets which recorded declines in the numbers of new projects.
Job creation linked to FDI also increased throughout Europe and the UK. Of the projects that disclosed headcount numbers (both new and existing projects), 2,603 jobs were created through financial services investment projects in the UK, representing a rise of 4% from 2021 (2,495 jobs). Across Europe, the disclosed number of jobs created from new and existing projects rose by 20%, from 8,948 in 2021 to 10,708 in 2022, led by France with 1,734 new jobs.
Anna Anthony, UK Financial Services Managing Partner at EY, comments: “The strength of the UK financial market has meant that – even through challenging times – investors see it as the most attractive European financial services market. A lot has happened in the seven years since the EU referendum, and the UK has faced strong competition from its closest competitors. Our research shows that investors recognise the strength, gold-standard governance and resilience of the UK’s financial system and see it as the preferred destination for growth, innovation and access to top talent.
“Of course, we can’t be complacent. Industry and government focus on raising market attractiveness is key and should align with what matters to investors – such as levelling up, enhancing social infrastructure and upskilling local talent – to ensure UK financial services retains and continues to extend its leading role on the global stage.”
London remains the main centre for FDI and extends lead over Paris
London remains the leading European city for attracting financial services FDI, securing 46 projects in 2022, up from 39 in 2021 (an 18% increase). Paris placed second despite recording a slight decline, from 38 projects in 2021 to 35 in 2022 (a fall of 8%). Madrid placed third, and also recorded a fall, from 29 projects in 2021 to 22 projects in 2022. Fourth-placed Milan has seen its projects double from eight in 2021 to 16 in 2022.
The US is Europe’s main source of FS FDI, with the UK the main recipient
The largest source of financial services investment into Europe in 2022 was once again the US, with US-backed projects up 7%, from 74 to 79 projects. US investment currently comprises 27% of all financial projects into Europe. The UK was the leading recipient of US investment, securing 21 projects (up from 17 in 2021); an increase of 24%. France, which was the leading recipient for the first time in 2021 with 19 projects, secured 13 projects in 2022.
Omar Ali, EMEIA Financial Services Managing Partner at EY, comments: “Despite significant geopolitical and economic challenges facing markets over 2022, financial services FDI across Europe rose and the region recorded a 20% year on year rise in related job creation. This speaks to the underlying capability, expertise and skills found in Europe’s financial centres, and demonstrates sustained confidence from global investors even in turbulent times. While the UK continues to lead Europe on the number of projects, the eurozone’s major markets are performing strongly - France and Germany in particular attracted big banking projects in 2022.
“The global banking sector has experienced considerable volatility over the past months, yet Europe’s financial markets have remained resilient, and as a result, confidence levels aren’t expected to significantly deteriorate. As we look ahead, the eurozone economies are expected to bounce back by the end of 2023 and into 2024 and attract increasing levels of inward financial services investment.”
Within the UK, London retains FDI top spot with Scotland in second place
London remains the top UK destination for financial services FDI (with 46 projects), and Scotland occupies second place with 8 projects (up from three in 2021). Scotland has held the second-placed region for financial services FDI – at least jointly – for nine of the last ten years, with the exception of 2021. The third-placed region in 2022 was the North-West of England with six projects.
Looking to the future, investors remain confident in the UK and affirm London as most attractive UK region
In addition to European FDI data, a global investor sentiment survey to explore future investment attractiveness of the UK found that:
- Four in five investors (80%) think the UK will retain or improve its level of financial services attractiveness over the next three years
- Over two-thirds (69%) of investors said they plan to establish or extend financial services operations in the UK over the next year – the same as last year and up from 50% in the 2021 survey
- London remains the most attractive UK region for financial services investment (according to 57% of investors), followed jointly by Scotland and the East of England with support from 8% of investors each
- The key UK regions in which investors are planning to establish or extend financial services operations over the next year are London (41% – down from 56% in 2022), followed by Scotland (14% – up from 12% in 2022), and Yorkshire & Humber (10% – up from 3% in 2022)
- At a city level, 17% of investors reported financial services plans in Edinburgh over the next year and 14% in Leeds
- Investors cite the key areas for future strategic investment as being (1) the liquidity of markets and availability of capital (38%), (2) the level of tech adoption by citizens and administrations (35%), and (3) the stability of political and regulatory regimes and safety of securing measures to prevent a major crisis (28%)
When looking specifically at the UK and how attractiveness could be further improved, investors noted that the Government should prioritise levelling up, enhancing the social infrastructure and expanding the skills levels of the UK workforce.
Notes to editors:
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 6th February – 13th March 2023, based on a representative panel of 86 international decision-makers across banking, insurance, wealth and asset management and FinTech.