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Brexit impact: Foreign investment projects see 26% fall in UK in 2017

Rivals in EU, and especially Germany, are challenging UK's top spot of being the preferred destination for foreign investment in financial services

Reuters  |  London 

UK, Britain, London
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Britain's lead as the top European destination for is starting to narrow as continental rivals vying for its business are boosted by Brexit, according to a report published on Monday.

The report, by accounting and consulting firm EY, found that the UK hosted just 14 more in financial services last year than second-placed Germany, down from a gap of 67 in the previous year.

The number of projects in the UK fell 26 per cent in 2017, compared to an increase of 64 per cent in Germany, 123 per cent in France and 13 per cent across Europe as a whole.

Britain's EU neighbours have looked to capitalise on uncertainty over its future access to European markets to encourage financial firms to set up shop in their own countries, in a challenge to its long-established reputation as the European capital for the sector.

Omar Ali, EY's UK financial services leader, said Britain hung on to the top spot as factors like its talent, infrastructure and robust regulatory and legal systems were hard to replicate overseas.

"But we can't ignore the drop in investment and forward-looking sentiment - investors are sending a clear message that answers are needed on future trading arrangements, access to skills and the UK's future approach to the "

UK financial services attracted 78 last year, down from a record 106 in 2016, said. Germany, in second place, won 64, while France saw 49, up from 39 and 22 respectively.

Ireland saw its number increase from 12 to 28, while Luxembourg attracted 17 projects compared to 2 in 2016.

For that rely on Britain's membership of the EU to run their European operations, slow progress in Brexit negotiations has stoked fears that their access to the bloc could be restricted or even shut off altogether after March 2019, when Britain leaves.

This has prompted many to enact plans for a worst-case scenario, which usually involve shifting some of their British operations on to the continent to protect them even if Britain crashes out of the bloc with no deal.

Some banks, including Barclays and JPMorgan, have already started moving some of their staff elsewhere.

"The question is, will this be a temporary shift or the start of a more sustained trend?" Ali said.

A survey conducted by as part of the report found that two-thirds of hadn't changed their investment plans following the Brexit vote, and 75 per cent said they had no plans to relocate to the continent.

Retaining strong trading arrangements with the EU was cited by 39 per cent of investors as a key to ensuring the UK remains attractive in future, with 33 per cent saying the same for trade deals with new countries and 31 per cent highlighting incentives for foreign investors.

First Published: Mon, July 09 2018. 12:59 IST