The UK – in particular, London – remained Europe's No. 1 choice for foreign investment in financial services last year, despite the referendum vote to leave the European Union, according to a new report from EY.

Highest recorded financial investment in the UK for more than a decade

Although Germany, in second place, and third-placed France both attracted increasing amounts of foreign direct investment (FDI) during the year, the level of investment in the sector in the UK during 2016 was the highest recorded for more than a decade.The total number of FDI financial services projects in Britain last year was 99, five per cent up on 2015. Germany attracted 39, a year-on-year rise of 18 per cent, while France recorded 25 investments, a 25 per cent increase.Both Germany and France are pulling out all the administrative stops in a bid to attract financial services amid Brexit fears that UK-based companies will lose the 'passporting rights' that enable them to operate freely throughout Europe.

Brexit concerns means the future is uncertain

Omar Ali, EY's UK financial services leader, said, “Despite the referendum, UK financial services continued to attract record levels of investment last year. However, the outlook for 2017 and 2018 isn't so certain.“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.“Our study of investor sentiment is showing they are concerned about the outcome of Brexit negotiations and their confidence will have been shaken further by recent political events.”

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EY found that 69 of the projects in the UK went to London, compared to only 19 for Paris and 12 for Frankfurt. The US was by far the biggest investor in the UK, backing a third of new projects, while China was second largest, with nine per cent.As part of the report, EY questioned 80 foreign investors across 20 countries and found that 42 per cent cited concerns over the possible loss of markets following Brexit. On the plus side, the UK’s quality of life, culture and technology were each cited by 83 per cent of respondents as key factors behind the country’s continued appeal.

Thriving fintech sector in the UK: a major attraction

The nation's thriving fintech sector was also a major attraction, with 72 per cent of investors saying the industry had made the UK more attractive for FDI.On the down side, tariffs on exports troubled 39 per cent of investors, while tariffs on imports were identified by 15 per cent as a potential problem going forward.“It’s vital that 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 pre-eminent financial centre for many years to come,” said Mr Ali.EY also found that investor confidence over access to talent in the UK and local labour skills, plus the stability of the nation's social and political climate, had declined over the past 12 months.A third of investors said that reducing corporate taxes would make the UK more attractive, while a quarter said that retaining the UK’s current trade agreements with the EU would increase appeal.For related news and features, visit our Brexit section.Access hundreds of global services and suppliers in our Online Directory  Get access to our free Global Mobility Toolkit

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