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UK, Europe’s most attractive center for investment in financial services
The UK continues to be Europe’s most attractive location for foreign direct investment in financial services, according to new research from EY. The country currently hosts a third of all these projects, growing 7% compared to last year.
An FDI is an investment in the form of a controlling stake in a company, real estate or productive assets, such as factories in one country, by an entity based in another country. The cumulative value of FDI around the world fell sharply in the years before the pandemic – reaching a decade low in 2018 – but has been recovering rapidly since then. In 2021, the level of FDI had already increased to more than 2 billion dollars, for the first time since 2016.
The UK is among the main beneficiaries of this recovering market. Earlier in the yearresearch from strategic consultancy Kearney found that the UK was the fifth most attractive destination for FDI in the world – behind the US, Canada, Japan and Germany – but a new study from Big Four firm EY suggests that its status may actually be even higher in the financial sector.
Source: EY
According to EYEAccording to UK researchers, the UK has accelerated its leadership over other European FDI markets on this front, attracting 108 financial services projects in 2023. This increase of 76 projects in 2022 has seen it increase its market share from 26% in 2022 to 33%. by the end of 2023. By comparison, rival markets France and Germany each secured just 12% of Europe’s FDI linked to financial services projects.
Anna Anthony, EY UK Financial Services Managing Partner, commented: “The UK not only maintained its lead as the most attractive European financial services market last year, it also significantly extended it. Even through challenging macroeconomic conditions and geopolitical uncertainty, the stability of the UK financial services sector has ensured that foreign investor confidence remains strong.
Across Europe, the total number of FDI projects in financial services grew to 329 in 2023, up from 292 projects in 2022 – a 13% increase on the previous year. Demonstrating the increasing health of this segment, the growth outpaced the overall growth of European FDI projects, which saw a 4% decline during the same period, and contrasts with other professional services sectors such as technology and digital and business services. which recorded both years- The number of annual projects declines by 19% and 27%, respectively – despite huge levels of enthusiasm around innovations such as artificial intelligence.
Source: EY
Looking ahead, the UK may also be positioned to extend this lead further. In addition to investments coming from projects that had already invested capital in the country’s financial sector, Great Britain was the chosen destination for the largest number of new financial services projects. The UK registered 85 new financial services projects in 2023, representing a 25% increase from 68 projects in 2022, and resulting in the UK’s market share in new financial services projects increasing from 32% in 2022 to 36% in 2023 – the highest level in a decade. In comparison, Germany attracted 32 new projects, up from 12 in 2022, and France secured 22 new projects, up from 26 the previous year.
Across the continent, the climate was similar. The number of new financial services projects across Europe reached its highest level since 2019, rising to 233 projects in 2023, up from 215 projects in 2022 – an increase of 8%. However, EY warned that the UK and the entire continent could soon face competition for FDI from further afield – and will need to adapt quickly.
Anthony added: “Competition is fierce – both from European peers and from other countries – and increasing the attractiveness of the market must be a top priority for both industry and government. Efforts to increase attractiveness must build on our strengths and focus on what matters most to investors; including defining future frameworks to drive innovation, leading gold standard regulation and attracting the best local and international talent.”