It extends its lead over other European countries despite economic challenges
Despite significant geopolitical and economic challenges facing markets over 2022, the UK remained Europe’s most attractive location for foreign direct investment (FDI) into financial services, the results of EY’s latest Attractiveness Survey for Financial Services have revealed.
The UK reportedly 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 for 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.
EY, citing findings in its latest Attractiveness survey, said 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.
For all the gloom around the impact of Brexit, the UK leads as Europe's top destination for foreign direct investment in financial services https://t.co/4nwFt6tA5V— Bloomberg UK (@BloombergUK) June 5, 2023
The UK is now home to more than a quarter of all European financial services FDI projects, having increased 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%.
In addition to the expansion of existing projects, the UK recorded year-on-year growth 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, 2,603 jobs were created through financial services investment projects in the UK, representing a rise of 4% from the 2,495 jobs recorded in 2021. Across Europe, the 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.
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, and the UK was the leading recipient of US investment, securing 21 projects – up from 17 in 2021 or an increase of 24%.
Among European cities, London remained at the top in terms of 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 strength of the UK financial market has meant that – even through challenging times – investors see it as the most attractive European financial services market,” Anna Anthony, UK financial services managing partner at EY, commented. “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.”