An exterior view of the Bank of England in London, Britain, 23 March 2023. EPA-EFE/ANDY RAIN


UK still European financial powerhouse


The UK has cemented its role as the financial powerhouse of Europe, extending its lead over France as the most attractive location in the region for foreign direct investment (FDI), according to a leading academic.

Professional services giant EY’s latest Attractiveness Survey for Financial Services, which ranks the appeal of a particular region or country as an investment destination, revealed that 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.

Last year, the UK attracted 76 financial services projects – an increase of 13 from 2021 – extending 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.

Professor Sarah Hall, Senior Fellow at UK in a Changing Europe and expert on the economic impact of Brexit on the UK, believes the UK will hold on to its top-ranking thanks to significant advantages that, even after leaving the EU, remain firmly entrenched.

“It’s important to remember that the UK, and London in particular, dominated financial services activity in Europe prior to Brexit to a very significant extent,” Prof Hall said.

“Whilst the Brexit trade deal does little to support UK financial services, many of the factors that made the UK attractive prior to Brexit remain. These include a deep and dense cluster of market actors, access to a highly skilled labour market, and the English common law system. It will take time to rebuild this in any other city and that is why, whilst cities such as Paris and Dublin have seen growth, London still dominates.”

And while the UK maintains its advantage overall, it could still do better as Brexit offered up potential is still be exploited.

Prof Hall added: “The progress on regulatory reform for financial services post Brexit has arguably been slower than the sector would have liked. This is important because the ability to set regulation to the specific needs of the UK economy is seen as one of the main Brexit potential Brexit benefits.”

The most recent survey comes nearly seven years after the Brexit vote which some economists prophesised would lead to investors fleeing the UK in droves and one particularly damning report from University College London forecasting a plunge in FDI in the UK of around 37 per cent as a direct result of leaving the single market and customs union.

The largest source of financial services investment into Europe in 2022 was once again the United States, with US-backed projects up 7%, from 74 to 79 projects. Investment from across the Atlantic currently comprises 27% of all financial projects into Europe. The UK took the lion’s share of that 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.

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.

The boost in FDI was also linked to job creation in the UK with both new and existing projects creating 2,603 new jobs, representing a 4% rise of from 2021.

Commenting on the survey, EY Managing Partner on UK Financial Services, Anna Anthony said: “A lot has happened in the seven years since the EU referendum and the UK has faced strong competition from its closest competitors. But 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.”