KPMG’s latest UK Financial Services Sentiment Survey of 150 industry leaders found that 90% of them plan to increase their footprint outside of London in the next five years.
About 57% plan to open new offices outside the capital and 48% say they will expand existing regional offices.
Almost a quarter (23%) plan to expand across the East of England, followed by 18% eyeing expansion in Scotland and Yorkshire and the Humber.
Manchester was the city outside of London cited most (47%) by industry leaders as having the greatest potential to be the UK’s second city for financial services, followed by Birmingham (20%) and Edinburgh (11%).
Edinburgh has traditonally been viewed as the UK’s second city for financial services, with its large institutional investment firms including Abrdn and Baillie Gifford. However, Royal Bank of Scotland, now called NatWest, has been run from London for several years, and Bank of Scotland is now part of Lloyds Banking Group.
Nonetheless, financial services leaders surveyed in Scotland said they are more positive about the sector’s future growth under the new UK government.
The quarterly poll, which was conducted after the General Election, tracks sentiment among over 150 leaders working across banking, insurance, asset and wealth and private equity in the UK including Scotland.
Of those surveyed in Scotland, 75% were “quite confident” of growth prospects this quarter, driven by expected growth in demand for services and plans to enter new markets.
“On top of their own expansion plans, more than a third of leaders (39%) say that the regional expansion of their global counterparts outside of London would most support financial services growth across the UK,” said KPMG.
“A quarter felt that greater investment in regional infrastructure would boost sector growth outside of London, followed by 22% saying that local government needs to have more powers to support financial services clusters to help boost the sector’s presence across the country.”
Karim Haji, global and UK head of financial services at KPMG, said: “A change of government always marks new chapter for the country and one of its most important sectors. Most financial services leaders are forecasting a brighter future under the new government, buoyed by both the prospect of national change and continuity of financial services policy and reform.
“In the coming weeks and months, the sector will want to see more details emerge on the government’s strategy for financial services, greater partnership between it and sector leaders to collaborate on addressing challenges and a co-ordinated plan to strengthen the UK’s competitiveness as a global financial centre.”
Katie Clinton, Partner, Head of Regional Financial Services at KPMG UK, said: “This is a vote of confidence for the vibrant and fast-growing financial services hubs outside of London. To fully realise the opportunity they offer the sector, investment in the infrastructure and talent underpinning their expansion is sorely needed.
“Cities like Manchester, Birmingham and Edinburgh have long been snapping at London’s heels, so it’s great to see firms are also planning to increase their presence in areas outside of urban centres. This will not only offer a boost to more local economies, but help firms to benefit from a greater diversity of experiences and skills sets.”
Looking to the rest of Q3, most sector leaders are confident about business growth (87%) and profitability (88%) over the period, driven by increased demand for products and services (49%), new technology (45%) and plans to enter new markets (41%).
“Leaders also called out specific areas of focus to ensure sector growth over the next five years,” said KPMG.
“Almost a quarter (23%) said innovation to help solve environmental and socio-economic changes such as climate change and ageing populations was needed. This was followed by 21% saying more effort was required to make the UK more attractive to overseas talent through infrastructure investment, housing and immigration changes.
“Just nine percent of leaders feel that efforts to increase the volume of businesses listing on the London Stock Exchange would most support the sector over the next five years.”
Karim Haji added: “Despite all of the discussion and much needed industry focus on making London a more attractive listing destination in recent months, it’s clear that innovation and attracting talent should be given equal billing if the sector’s positive growth expectations are to be realised in the long term.”