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Sentiment shifts

Overseas financial services investment slows

Glasgow IFSD

Investment in the financial services sector is declining (pic: Terry Murden)

Foreign investment into UK financial services is expected to slow over the next 12 months as the Covid pandemic shifts investor sentiment.

Last year investor sentiment firmly placed Financial Services as the driving force of UK growth, and the sector attracted 99 projects, equating to more than a quarter of FDI in the sector across Europe.

However, EY’s latest UK Attractiveness analysis for Financial Services indicates that amid the pandemic investors are looking to prioritise investment in the digital economy, with the real estate and healthcare industries also rising in prominence, at least in the short term.

Investor sentiment on short-term investment plans into the UK has fallen over the course of this year, and the number of overseas companies planning to invest in the next 12 months has dropped to 25% from a ten-year high of 31% in April.

Within financial services, there has also been a fall, and only 10% of overseas firms are now planning to establish or expand their operations in the UK in the coming year.

This is significantly down on the 45% cited in EY’s last survey carried out in April this year; and even marginally down on the 11% in 2019 when Brexit uncertainty was at its peak, heavily influencing sentiment.

This is significantly down on the 45% cited in EY’s last survey carried out in April this year; and even marginally down on the 11% in 2019 when Brexit uncertainty was at its peak, heavily influencing sentiment.

Twenty percent of the Financial Services Firms surveyed have said they’re now planning a substantial decrease in investment in the UK over the next 12 months due to COVID-19, with a further 28% planning a minor cut; 18% said they’re putting plans on hold for the time being.

Sue Dawe

Sue Dawe: ‘markets are fluid’

Positively, 23% of respondents have said they expect no change to their investment plans, and 10% say they plan to increase investment.

Sue Dawe, financial services managing partner for EY Scotland, said: “It is perhaps not surprising that investors – across all sectors – are taking a very cautious approach to expansion or relocation while we remain in the middle of the pandemic.

“However, as talk of COVID-19 vaccines gather at pace, we can turn to the task of economic recovery with increasing optimism.

“Markets are fluid, competition remains global and the impact of COVID-19 will most likely alter the influencing factors that drive companies to choose where they build their business: Scotland has an extremely strong case to compete and be a top choice for relocation within the UK and at the global level.

“Highly skilled job opportunities and the relatively low cost of living contribute towards Scotland’s high quality of life. It is an important factor to help boost the talent pool and propel the industry forward, especially with many professionals evaluating their surroundings as a result of lockdown restrictions.”



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