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Botched Brexit dragging City’s attractiveness to new low, warns EY

Brexit spooks investment sentiment as country’s longer-term attractiveness plummets, survey shows

Boris Johnson speaks during a Conservative leadership debate on June 18, 2019 Jeff Overs/BBC/Getty Images

Brexit is casting a growing shadow over the UK’s financial services sector, with sentiment on the country’s long-term appeal to banks, fund managers and insurers at an all-time low, according to consultancy EY.

EY found that almost half (48%) of respondents to its latest survey on the draw of the UK to financial services companies believed its attractiveness would decrease over the next three years.

Underpinning the pessimism among leaders of banks, investment companies and insurers are concerns about a loss of access to Europe’s single market, something that could happen suddenly for many in the City if the UK leaves the bloc without a withdrawal deal in place on October 31.

The likelihood of this has increased since the resignation of Theresa May as UK prime minister, with the frontrunners to succeed her, including former foreign secretary Boris Johnson, campaigning on a willingness to see a no-deal Brexit through – despite warnings of severe economic consequences.

Omar Ali, EY’s UK financial services leader, said: “We should all be concerned that almost half of financial services investors currently believe the UK is becoming a less attractive place to invest in.”

The UK remained the top location for financial services investment in Europe last year, having attracted 112 foreign direct investment projects – a 44% increase from 2017 – mainly from the US.

But EY’s Ali noted: “The high level of investment in 2018 reflects the historic optimism of investors at the time. If you cast your mind back to the second half of 2017, mutual market access was still on the table and an orderly and business-friendly transition deal looked like it could still be reached before the 2019 deadline.”

City leaders have already voiced concerns about the prospect of Johnson becoming the UK’s next prime minister. The bookies’ favourite ruffled feathers in June 2018 after saying “f*** business” when asked about the corporate world’s opposition to a no-deal Brexit.

EY surveyed 68 financial services investors – defined as senior decision-makers at large financial institutions – in April and May this year. Just 11% said they intended to establish or expand existing operations in the UK, down from 16% a year ago, while 86% said no such plans were underway, up from 82%.

Ali said: “In 2017 just 18% of investors thought the UK’s attractiveness would decrease, in stark contrast to 48% today.”

To contact the author of this story with feedback or news, email Bérengère Sim

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