Scotland has returned to its long-held position as the top UK location for financial services foreign direct investment (FDI) outside of London.
EY’s latest Attractiveness Survey for Financial Services revealed that London remains the most attractive UK destination, with 46 projects in 2022, with Scotland in second place, recording eight projects - up from three in 2021.
Scotland has been the second-placed region for financial services FDI - at least jointly - for nine of the last 10 years, with the exception of 2021. The third-placed region in 2022 was the north west of England, with six projects.
Of the eight Scottish projects, five were expansions to existing projects, while three were new undertakings, spread across Edinburgh (five projects total – three expansions, two new) and Glasgow (three project total – two expansions, one new).
These findings come ahead of the full survey publication later this month.
Sue Dawe, EY Scotland’s managing partner for financial services, said: “Scotland has deep roots in financial services, and it is positive that we can report improved investor confidence and growth in foreign direct investment projects.
“To see a solid mix of both new and expanded financial services projects in our major cities - as well as our return to being the top location outside London - shows that Scotland is delivering for investors.
“Looking to the future, financial services investors remain confident in Scotland,“ she continued, adding: “The number of projects is only one metric in FDI attractiveness, and over the years the significance and scale of individual projects in Scotland - particularly in financial services - is both notable and impressive.“
Sandy Begbie, chief executive of Scottish Financial Enterprise, said: “Scotland’s financial services industry has a number of major strengths for investors, from depth, breadth, and maturity of our ecosystem to talent and innovation, to our increasingly strong reputation as a global centre for green finance and fintech.
“We also recognise that we are in an increasingly competitive domestic and international marketplace, leaving no room for complacency.
“In the next few months we plan to deliver a new sector growth plan, while we will also be increasing the promotion of our industry internationally over the next few years.”
EY’s global investor sentiment survey found that, alongside the east of England, Scotland was the joint-most attractive place to invest in the UK outside of London.
Meanwhile, 14% of investors plan to establish or expand operations in Scotland over the next year, up from 12% last year - and the highest percentage recorded for any location outside of London.
Edinburgh is perceived to be the most attractive city outside of London, with 17% of investors reporting financial services investment plans in Scotland’s capital over the next year.
When looking specifically at the UK and how attractiveness could be further improved, investors noted that the UK Government should prioritise levelling up, enhancing the social infrastructure and expanding the skills levels of the workforce.
The UK continues to be Europe’s most attractive location for financial services FDI projects, attracting 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.
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, with investment affected by the war in Ukraine, high energy prices and inflation.
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. 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 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 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 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.
The UK was the leading recipient of US investment, securing 21 projects - up from 17 in 2021 - an increase of 24%.
UK field research was conducted by Euromoney from 6 February to 13 March, based on a representative panel of 86 international decision-makers across banking, insurance, wealth and asset management and fintech.
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