Scotland has returned to its historic position as the top location for financial services foreign direct investment (FDI) in the UK outside of London, according to EY’s latest Attractiveness Survey for Financial Services.
London remains the most attractive UK destination for financial services FDI with 46 projects in 2022, with Scotland in second place at eight projects, up from three in 2021.
Scotland has held the second spot for financial services FDI – at least jointly – for nine of the last 10 years, with the exception of 2021.
The third-placed region in 2022 was the North-West of England with six projects.
Of the eight Scottish projects, five were expansions to existing projects while three were new undertakings — spread across Edinburgh with five projects and Glasgow with three projects.
These findings come ahead of the full Scotland Attractiveness Survey publication later this month.
According to trade body Scottish Financial Enterprise, Scotland’s financial services sector is the biggest sectoral contributor to Scotland’s economy, representing £13.6 billion or 9.2% of Gross Value Added (GVA).
Roughly $1 trillion of assets are under management, administration and advice by financial firms headquartered or represented in Scotland.
Institutions headquartered in Scotland include Abrdn, Baillie Gifford, NatWest-RBS and Lloyds Banking Group, while international companies with substantial operations in Scotland include Franklin Templeton, Phoenix Group, BNY Mellon, Barclays, Blackrock, Morgan Stanley and Royal London.
Scotland’s financial and related professional services sector is a significant employer, employing 160,000 people – around 9% of Scotland’s national employment.
“Global investor sentiment showed Scotland’s attractiveness within financial services is joint second with East of England at 8% but takes sole second place among those who plan to establish or expand operations over the next year,” said Scottish Financial Enterprise.
“This has risen to 14% of those surveyed, from 12% last year. Edinburgh is the top city outside of London with 17% of investors reported financial services plans in Scotland’s capital over the next year.
“London retains this top spot for investor sentiment at 57% but has reduced to 41% this year from 56% last year among those planning to establish or expand operations over the next year.
“However, 80% think the UK will retain or improve its level of financial services attractiveness over the next three years.”
Sue Dawe, EY Scotland’s Managing Partner for Financial Services, and SFE Deputy Chair, said: “This is great news for Scotland’s financial services sector.
“To see a solid mix of both new and expanded projects – as well as our return to top location outside London – shows that Scotland is delivering for investors.
“Looking to the future, financial services investors remain confident in Scotland.
“While the number of projects is only one metric in FDI attractiveness, the significance and scale of individual projects – particularly in financial services – shouldn’t be overlooked.
“With links between Scotland and London remaining strong, it’s clear that the two locations – which have historically held the top two spots in the UK league tables – can benefit from the respective successes.
“I’m passionate about being part of an industry that offers the next generation of workforce a meaningful career, fosters a strong skills pipeline, and gives back to communities it operates in.
“As an industry we need to keep working hard to make financial services an attractive career option for our young people – and those looking to retrain – and empower the brightest to excel, no matter their background. Scotland is punching above its weight on the global stage, and we need to keep fighting fit.”
Scottish Financial Enterprise CEO Sandy Begbie said: “It’s welcome news to see Scotland retain its position as the UK’s major inward investment hub for financial services outside of London in EY’s latest Attractiveness Survey.
“Scotland’s financial services industry has a number of major strengths for investors, from depth, breadth, and maturity to talent and innovation, to our increasingly strong reputation as a global centre for green finance and fintech.
“We also recognise that we are in an increasingly competitive domestic and international marketplace, leaving no room for complacency.
“The continued growth and development of Scotland’s financial services industry is a key priority for SFE, and in the year ahead we plan to deliver a new sector growth plan and campaign to promote the industry internationally.
“Collaboration with both the Scottish and UK Government, as well as with key partners like City of London Corporation, and stakeholders from across the industry, is key to achieving this aim.”