The UK remained the top destination for foreign investment in financial services last year despite the Brexit vote, although France and Germany are seen as increasingly attractive.
Britain’s finance industry attracted 99 foreign direct investment projects in 2016, 5% up on 2015 and the highest number for a decade, according to a survey by accountancy firm EY.
London remains the most attractive European city for international investment, recording 69 projects – compared with just 19 for Paris and 12 for Frankfurt.
France and Germany rise
But France and Germany also boosted their rankings. France attracted 25 financial projects and Germany 39, increases of 25% and 18% respectively on 2015.
The City of London’s attractiveness as a place to do business fell from 74% to 62%, though, with investors concerned about access to the Single Market and the ability to recruit overseas talent. In contrast, Paris rose by 13 percentage points to 52%, while Frankfurt shot up by 20 points to 44%.
Some experts predicted thousands of finance jobs could be lost in the City after the referendum, due to fears over being able to sell financial services in Europe post-Brexit.
Record levels of investment
But while some companies such as Goldman Sachs are moving hundreds of staff to Paris and Frankfurt, the feared exodus has not occurred.
“Despite the referendum, UK financial services continued to attract record levels of investment last year,” said Omar Ali, EY’s UK financial services leader.
“The UK remains a world-class place for financial services firms to do business. The talent, infrastructure, quality of life, plus deep capital markets and a robust regulatory system, are hard to rival.”
Concerns remain about the UK leaving the EU, however. The key issues for financial services investors are loss of access to EU markets (42%), tariffs on exports (39%), and tariffs on imports (15%).
There are a number of areas global investors have stated would make the UK more attractive including reducing corporate taxation levels (33%), negotiating trade deals with new countries (26%), offering incentives for foreign investors (26%), retaining membership of the EU Single Market (25%), ensuring access to the UK labour market for skilled foreign workers (22%), and reducing the regulatory burden on business (17%).
“We can see from our study that investors have concerns about what Brexit may mean for the future and they want greater clarity on corporate taxation and incentives for foreign investors,” said Mr Ali.
“It’s vital the government does all it can to articulate a clear strategy around skills, market access and future trading arrangements to ensure the UK continues to be Europe’s preeminent financial centre for many years to come.”