Sentiment around planned investment into UK financial services has risen significantly in recent months, increasing from 50% in last spring’s survey and picking up considerably on the low of 11% recorded in 2019 before the onset of the pandemic.

Financial services firms constantly review their operating models and strategies, but the COVID-19 pandemic has forced a wholesale reassessment of virtually every aspect of a company’s business, including its investment plans.

A total of 41% of global financial services firms surveyed in November 2021 said that the pandemic has meant they are planning to increase their investment in the UK, with 8% planning a substantial increase. This is markedly higher than in the spring of 2021 when only 6% said they were planning on raising their UK investment level.

In addition, 90% of global financial services investors now think the UK will retain the same level of attractiveness or improve over the next three years, up from 75% in spring 2021 and 50% in spring 2020.

More than half (59%) of global financial services firms surveyed by EY said ESG was either the top priority or within the top three priorities of their board’s investment strategy, and only 3% claimed ESG was not on their priority list at all. Furthermore, 87% of respondents said the UK offers the right environment for ESG investment.

Over half (54%) of global financial services firms surveyed said a country’s success in addressing the pandemic is currently the most important factor influencing investment location. Other key priorities for investors are the safety and security measures put in place to prevent a future major crisis, whether that be a health, environmental or cyber crisis, (38%) and the liquidity of capital markets and availability of capital (33%).

Sue Dawe, EY Scotland financial services managing partner, said: “Our interim Attractiveness Survey results demonstrates the strength and global reputation of our Financial Services sector, despite weathering continued pressures from both the pandemic and Brexit.

“The business and finance sectors turned out in force to be part of the conversation at COP26 in Glasgow, and so it’s encouraging to see that 87% of investors view the UK as the right place for growth in ESG.

“There’s a real opportunity for financial services to capitalise on this wave of positive sentiment to propel it’s success even further and not rest on our laurels. Scotland’s financial sector has a solid foundation, with a long history of experience in banking, insurance and wealth and asset management, but we must continue to be forward-looking in both boom times and crisis.

“The refreshed Scottish Financial Enterprise strategy will play a huge role in this. As we focus on maintaining Scotland’s place as a market leader and an attractive location to invest, our journey to net-zero, focus on economic recovery, talent and skill pipeline, and how we respond to changing customer needs must remain at the forefront for decision makers, both in the public and private sectors.”

Confidence in London as the chief location for new financial services investment into the UK remains, with 54% of global firms surveyed citing the capital as the most attractive UK region in which to establish or expand financial services operations – up from 31% in the spring of 2021. Scotland, perceived as the second most attractive region for financial services investment alongside the East of England, was down slightly with 13%, a decline from 15% in spring last year.

When looking at what the UK government needs to do to further improve the UK’s attractiveness, global financial services investors suggest prioritising geographic rebalancing of the UK economy by ‘levelling up’ (54%). This is followed by improving the skills levels of the UK workforce (28%), reducing corporate taxation levels (21%) and allocating investment that will accelerate the UK’s move towards reaching Net Zero (18%).

When considering investing regionally, outside of the capital, investors are looking for improvements in the strength of business networks (64%), better access to regional grants and incentives for investment/ R&D (46%) and more availability of business partners and suppliers (41%).

Given the changes brought about by COVID-19, and the almost overnight move to remote working at the beginning of the pandemic, it is unsurprising that inward investors think the digital economy remains a key driver of UK growth.

However, for FS investors, it has slipped from the top spot in April 2021 (cited by 54% of investors) to second place, cited by 51% of respondents in November 2021. Business / professional services is now seen as the primary growth driver, cited by 54% of investors, with financial services remaining in third place, cited by 41%.