London Gets Vote of Confidence From Big Finance Firms, EY Says
Comment of the Day

January 26 2022

Commentary by Eoin Treacy

London Gets Vote of Confidence From Big Finance Firms, EY Says

This article from Bloomberg may be of interest to subscribers. Here it is in full:

Most global finance firms are planning to establish or expand operations in the U.K. in 2022, according to a survey of 40 key decision-makers in the industry.

Around 87% of global financial services investors expect to invest in the U.K. next year, EY’s latest poll found. That’s the highest since the professional services firm started tracking sentiment toward the country in 2016, the year of the Brexit vote, and compares to 50% in early 2021 and a low of 11% in 2019. 

The data is a boost for the City of London, whose credentials as an international finance center are being questioned since the U.K. left the European Union. Meanwhile, 90% of respondents said the U.K. offers the right conditions to invest in assets with environmental, social and governance attributes.

“This is testament to the stability and resilience of the mature U.K. market which continues to ably withstand the material challenges and uncertainty of both the pandemic and Brexit,” said Anna Anthony, EY’s financial services managing partner for the U.K.

Eoin Treacy's view

There was a lot of fear that Brexit would result in London being denuded of financial firms. The reality is the Eurozone represents only a portion of the business done in one of the world’s great financial centres.

The banking sector has been out of fashion, both as an employment and investment destination since the credit crisis almost 15 years ago. As we look forward, there is a clear scope for the sector to recover as demand for capital trends higher in tandem with inflationary expectations.

The FTSE-350 Banks Index remains on a recovery trajectory. It failed to sustain the break to new lows in 2022 and has now unwound the pandemic panic decline. A sustained move below 3000 would be required to question medium-term scope for continued upside.

The FTSE-350’s four dominant sectors each occupy 9% of the Index. These are Oil and Gas Producers, Pharmaceuticals, Industrial Metals and Mining and the Banks. That gives UK investors a great deal of exposure to some of the big themes of the next decade simply by buying a broad index.

The fact that the UK and much of Europe are new relative strength leaders will burnish the region's attraction for internaitonal investors.
Standard Chartered appears to be in the process of completing its base formation.

Meanwhile Barclays has broken its medium-term downtrend.

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