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Digital economy is key driver of growth in UK amid COVID-19

Dec 02
Tags: Ernst & Young LLP
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Digital economy is key driver of growth in UK amid...

The biggest driver of future growth in the UK is now seen to be the digital sector in the eyes of many global investors. This situation is as a direct result of the national lockdowns and a major shift towards remote working for many employees.

Some 66 per cent of respondents told EY in its latest UK Attractiveness analysis for Financial Services they think this will be the case. When the same survey was conducted a year ago, 31 per cent of financial services firms believed it to be so.

Coming in second for the 2020 study is the real estate and construction sector, which 30 per cent of those surveyed are expecting to drive growth going forward. That is an increase of ten per cent over the results of 2019.

Unsurprisingly, overseas investors are also expected to be interested in the healthcare sector, with 28 per cent predicting it surging next year. Financial services also came in at 28 per cent, taking up the joint-third position with healthcare.

This is a big change from 2019 when 46 per cent of those in the financial services industry thought it would be their own sector driving growth. Global events in 2020 have seen things change dramatically and shaken up the outlook.

Omar Ali, UK financial services managing partner at EY, said: “UK financial services entered the pandemic in a very strong position, having led the rest of Europe in attracting overseas investment over the past 20 years.

“Our latest research shows, however, that industry sentiment has dipped, and a significant proportion of global investors are currently viewing sectors like technology and real estate as bigger drivers of UK growth, with interest in healthcare also rising. 

“In some respects, this isn’t surprising given COVID-19 and the sudden shift to remote working and the urgency of finding a vaccine. However, the shift in short-term investment plans suggests the lack of clarity about the relative importance of UK financial services in Brexit negotiations and trade discussions, and the future of the economy may have started to affect investor sentiment.”

The research was carried out prior to the chancellor Rishi Sunak outlining his vision for the Future of UK Financial Services last month. His commitments to launching a new National Infrastructure Bank and Long-Term Asset Fund, as well as making the UK a global leader in sustainable finance may change investor sentiment.

Meanwhile, the latest foreign direct investment (FDI) figures, which have been extracted from 2019 figures, show the UK financial services sector came into the pandemic in a position of strength. The UK was attracting more overseas investment than any other single nation and was ahead of the rest of Europe by a significant margin.

In 2019, the UK racked up 99 projects, which was double the number of its closest rival Germany. While the latest survey suggests a short-term dip in confidence, it’s thought the UK’s attractiveness as a financial services investment opportunity will pick up again over the next three years.

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