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.”
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.
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.