The UK has accelerated its lead as the most attractive destination for financial services investment foreign direct investment (FDI) into financial services over other European markets, according to EY’s latest Attractiveness Survey for Financial Services.

Having attracted 108 financial services projects in 2023 – an increase from 76 projects in 2022 –, the UK is once again Europe’s most attractive location for financial services investment.

It extended its lead over second-placed France, which secured 39 projects in 2023, down from 45 in 2022, according to the survey.

Germany came in third place, recording 38 financial services investment projects in 2023 – seven more than in 2022. In fourth place, Spain’s 17 projects were down from 31 in 2022.

EY suggests that Financial services FDI across Europe grew 13% from 292 projects in 2022 to 329 projects in 2021, outpacing overall European FDI project growth, which saw a 4% decline during the same period.

The UK is now home to a third (33%) of all European financial services FDI projects, having boosted its market share from 26% in 2022. By comparison, France and Germany each secured 12% of Europe’s financial services FDI projects, and Spain secured 5%.

The survey also found that in 2023, the UK reached its highest level of new financial services projects since 2019, recording 85 new financial services projects in 2023, representing a 25% increase from the 68 projects in 2022.

This resulted in the UK market share of new financial services reaching the highest market share of new projects in a decade, rising from 32% in 2022 to 36% in 2023.

By compassion, Germany attracted 32 new projects, up from 12 in 2022, and France secured 22 new projects, down from 26 the previous year.

Job creation linked to financial services FDI also increased throughout Europe in 2023, particularly in the UK, with 5,019 jobs created in the year, followed by Poland, with 3,259 jobs and Portugal, with 1,340 created jobs.

Anna Anthony, EY UK Financial Services Managing Partner, commented: “The UK didn’t just maintain its lead as the most attractive European financial services market last year, it extended it significantly.

“Even through challenging macroeconomic conditions and geopolitical uncertainty, the stability of the UK’s financial services sector has ensured foreign investor confidence remains strong.”

She continued: “However, competition is fierce – both from European peers and further abroad – and increasing market attractiveness must be a top priority for both industry and government.

“Efforts to boost attractiveness should build on our strengths and focus on what matters most to investors; including shaping future frameworks to drive innovation, leading on gold-standard regulation, and attracting the best local and international talent.”

Per city, EY found that London remains the leader in Europe for attracting financial services FDI, securing 81 projects in 2023, up from 46 in 2022.

With 31 projects, Paris placed second, a slight decline from the 35 projects recorded in 2022. Madrid placed third, and also recorded a fall, from 22 projects in 2022 to 11 projects in 2023.

The largest source of financial services investment into Europe in 2023 was once again the US, with projects up 15%, from 79 in 2022 to 91 in 2023.

According to the survey, this was the highest proportion of US-backed projects in the last decade and represented 28% of all financial projects into Europe.

The UK was the leading recipient, recording an 81% increase, this was an increase of 21 projects in 2022 to 38 projects in 2023.

Omar Ali, EY EMEIA Financial Services Managing Partner, said: “While FDI in tech and business services sectors fell across Europe last year, it continued to rise in financial services – even amid challenging macroeconomic conditions and geopolitical uncertainty.

Foreign investors remain drawn to the trusted capabilities, expertise and skills found in Europe’s major financial centres and place value on the region’s broad business ecosystem that also connects them to leading advisory, legal and tech services.

“Our future-looking sentiment research finds that investors not only remain confident in Europe’s financial centres today, but that they are looking to increase investment in the region over the next three years – in both established and emerging financial markets.”

Looking to the future, investors remain confident the UK will remain the most attractive European country for financial services investment in the coming year.

With three in four investors thinking the UK will retain or improve its level of financial services attractiveness over the next three years.

Investors have also affirmed London as one of the most attractive UK regions for financial services investment in the next three years. It sat in second place following Paris, with the third place taken by Barcelona.

The global cities identified as London’s biggest rivals for financial services foreign investment in the next three years are New York, Paris, Frankfurt and Berlin.