(Bloomberg) -- London still leads European cities in attracting foreign direct investment in financial services, with the UK’s share of new projects reaching the highest level in a decade, a survey by Ernst & Young showed.

London secured 81 projects in 2023, 76% more than the previous year and more than double that of second-placed Paris, which saw a 11% decline, the New York-based consultancy said in a report after a survey of 900 decision makers. It also said the French capital was slowly winning over hearts and is likely to challenge London’s dominance in the coming years.

Even through challenging macroeconomic conditions and geopolitical uncertainty, “the stability of the UK’s financial services sector has ensured foreign investor confidence remains strong,” said Anna Anthony, UK financial services managing partner at EY. However, she warned of “fierce” competition from European peers and further abroad. 

The EY survey findings suggest investors still view the UK as a reliable place to do business though Brexit and poor performance by London’s equity markets have raised concerns about its competitiveness. Trading volume has slumped in recent years, while Bloomberg-compiled data show the London Stock Exchange accounted for just over 2% of the roughly $12 billion raised in initial public offerings this year, the lowest share in decades.

The UK secured a third of all European projects in the financial services sector, widening its lead over nearest rival France, EY found. Britain attracted 108 projects in 2023 – an increase from 76 projects in 2022. That puts it significantly ahead of other European destinations like France and Germany, which notched up 39 and 38 projects, respectively. 

France, which is seeking to present itself as an attractive post-Brexit alternative to the City of London, secured 39 financial services projects last year, representing a drop of 13%. 

Yet the data showed that investors ranked Paris above London as the most attractive European city for future financial investment over a three-year horizon, EY said. Many Wall Street titans have been touting Paris as the next big finance hub in Europe. 

Other Insights from the Report: 

  • In the UK, 5,019 jobs linked to financial services FDI were created in 2023 – 93% more than in 2022 - meaning the UK generated 40% of all jobs created in Europe last year
  • The UK market share of new financial services projects rose to 36% last year, from 32% the year earlier – the highest level in a decade
  • About 57% of investors said they plan to establish or extend financial services operations in the UK over the next year – down from 67% in the 2022 survey
  • Financial services FDI continues to outpace overall FDI growth on the continent, with significant slumps in technology and business services, which experienced year-on-year project number declines of 19% and 27%, respectively

--With assistance from Aisha S Gani.

©2024 Bloomberg L.P.