LONDON: Britain's lead as the top European destination for international investment in financial services 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 foreign investment projects in financial services last year than second-placed Germany, down from a gap of 67 in the previous year, report Agencies.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 economy."
UK financial services attracted 78 foreign investment projects last year, down from a record 106 in 2016, EY 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 global financial firms 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.