London’s financial services sector remains strong in FDI

According to a recent article in CityAM relating to a new study by leading business advisory firm, EY, the UK has solidified its position as Europe’s premier destination for financial services investment.

In 2023, EY says the UK attracted 108 financial services projects, a significant increase from the 76 projects in 2022, outperforming its European counterparts. France, the second-place contender, secured only 39 foreign direct investment (FDI) projects during the same period.

This surge in financial services FDI means the UK now hosts one-third of all European FDI projects focused on financial services - up from 26% in 2022. France and Germany share second place, each accounting for 12%.

London’s Resilience and Role in FDI

Although EY highlights how London’s financial community continues to make it a trusted hub for financial activities and innovation, our recent analysis of Experian corporate transaction data shows London attracts FDI from other sectors.

Our analysis shows that although the number of UK firms involved in overseas deals decreased to 610 in 2023 (down from 711 in 2022), UK FDI is increasingly concentrated in London and the South East. According to our analysis, the region accounted for 42% of deals in 2023 (up from 35% in 2019).

The accountancy firm’s report also mirrors our findings about the vital FDI played by the US.

According to EY, the US remains the largest source of investment into European financial services, making up 28% of all FDI projects. Our own analysis shows that throughout the last 12 months, the US continued to be the most active investor in UK businesses, with just over a third (34%) of completed overseas corporate deals initiated by American organisations.

Balancing Investment Across the Country

Although London’s strength should be celebrated, we believed it’s crucial to balance this concentration of deals by encouraging greater levels of investment to other parts of the country and across different sectors. 

The UK Government’s strategy includes Freeports and Investment Zones. Announced in 2023, Freeports, for example, are designed to boost economic activity and the ‘levelling up’ agenda by fostering trade, investment, and job creation around maritime ports and airports. 

These government initiatives could be a gamechanger, providing favourable conditions for UK-based businesses, attracting more interest and investment from abroad, and contributing to overall economic growth.

The government says it’s committed freeports and investment zones and despite the current political uncertainty fuelled by a General Election, it’s vital these continue to be driven forward so that momentum is not lost. 

Further information 

Last summer, Irwin Mitchell published a report examining the most attractive locations in the UK for FDI. Inner London secured the top spot due to its local skills, large economically active population, and numerous well-respected. 

Irwin Mitchell will be publishing its next FDI report this summer.