LONDON (BLOOMBERG) – The City of London’s dominance of international finance is in large part thanks to its unparalleled success at attracting foreign investors. Last year, Covid-19 and Brexit’s endgame saw its advantage over Europe in that sphere shrink to the lowest level this century.
Britain secured foreign direct investment (FDI) for 56 financial services projects last year, compared with 99 in 2019, according to an EY survey about Britain’s attractiveness to financial services firms. While that still made Britain the most attractive destination in Europe, France was a close second with 49 projects, ahead of Germany’s 37.
While Britain still secured a fifth of all financial services FDI into Europe, this was down from 26.7 per cent in 2019, the report said. That is the narrowest the lead has been since EY started the survey in 2000.
The narrowing gap may fuel anxiety about the city’s ability to continue to capture an outsized share of foreign money now that it is unable to offer seamless access to the European Union.
The City of London’s decades-long role as the hub of European finance has been dented somewhat since Britain voted to leave the bloc. Banks have shifted assets and jobs across the channel and the continuing uncertainty about its future relationship with the EU means more shifts may happen, potentially undermining one of the pillars of the British economy.
Still, the report said that London could easily bounce back. It remains popular with investors, and investment could surge as the world emerges from the pandemic if Britain positions itself appropriately. The United States was the biggest source of investment into both Britain and Europe, accounting for 37 per cent of the projects in Britain and 23 per cent in Europe.
“It is crucial that now, post-Brexit and looking post-pandemic, British financial services definitively stamp their mark not only within Europe, but also on the global stage, by focusing on fintech and innovation and becoming a world leader in sustainable finance,” said Ms Anna Anthony, British financial services managing partner at EY.
