The UK risks losing popularity with foreign investors, but remains Europe's top financial services location

 
Lucy White
Views Of The Ever Changing London Skyline
The UK's investment lead is starting to narrow over countries such as France and Germany (Source: Getty)

The City's financial services offering may not be quite such a strong bargaining chip in Brexit negotiations as some have assumed, according to a new study by EY.

The UK has retained its title as Europe's most attractive location for foreign investment, as the nation's financial services industry recorded its highest level of foreign investment in more than a decade last year.

But its lead over other countries is starting to narrow, as France and Germany ended the year hot on the UK's heels.

“Despite the referendum, UK financial services continued to attract record levels of investment last year,” said EY's UK financial services leader Omar Ali.

“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.”

Read more: British financial services to accelerate post-Brexit after negotiating a tricky two years

The UK financial services industry attracted 99 foreign direct investment projects in 2016, up five per cent on the previous year.

Germany recorded 39 while France noted 25, up 18 per cent and 25 per cent respectively year on year.

What were the key concerns for investors in the UK?

Concern Percentage of investors who thought so
Loss of access to EU markets 42 per cent
Tariffs on exports 39 per cent
Tariffs on imports 15 per cent

Investors also raised concerns over lack of labour skills and access to talent, the stability of the social climate, and political, legal and regulatory transparency.

Read more: How the City can remain the jewel in London’s crown post-Brexit

What would make the UK more attractive?

Idea Percentage of investors who thought so
Reducing corporate tax 33 per cent
Negotiating trade deals with new countries 26 per cent
Offering incentives for foreign investors 26 per cent
Retaining current trading arrangements with the EU 25 per cent
Ensuring skilled foreign workers can access the UK labour market 22 per cent
Reducing the regulatory burden on businesses 17 per cent

Any loss of faith in the UK's financial services sector is important as the banking, insurance and wealth and asset management sectors are still perceived by investors to be the main drivers of growth for the country.

Read more: Look beyond Brexit to find the real risks to the City’s dominance

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