Scotland financial sector success may not bring joy to all

However, there is no doubt that both the cold numbers and messages in the survey are very good news indeed for Scotland.

Sue Dawe, EY Scotland managing partner for financial services, declared: “EY’s latest report shows the sector continues to attract much enthusiasm amongst investors and confirms Scotland’s position as a premier investment destination.”

These are encouraging words indeed.

Scotland continues to attract the highest number of financial services foreign direct investment (FDI) projects in the UK outside London, with the nation increasing its tally last year, the EY survey revealed.

Nine financial services FDI projects were won by Scotland in 2023, up from eight in the previous year.

Five of the nine projects won last year were in Edinburgh, and two were in Glasgow, with Motherwell and Dufftown each securing one project.

Of financial services investors looking to establish or expand operations in the UK over the next year, 26% are looking to Scotland, up from 14% in 2023, according to the EY survey.

This is also a most encouraging finding, in terms of the potential for Scotland to continue its impressive form when it comes to attracting financial services FDI projects.

Scottish Financial Enterprise chief executive Sandy Begbie was certainly optimistic about what the future might hold as he commented on the survey findings. SFE is the representative body for Scotland's financial services industry.

Mr Begbie declared: “We believe there is even greater potential waiting to be unleashed.”

And he highlighted the “quality of our universities and skills pipeline”.

Mr Begbie is absolutely right. Skills are key to attracting inward investment.

READ MORE: Ian McConnell: So what's the story with Kate Forbes and business?

Scotland’s FDI figures not just for financial services but across a broad range of sectors of the economy signal that the nation is viewed by overseas investors as having the skills that they need.

This is something that people could be forgiven for not realising, given some of the negativity in Scotland around education that seems to be driven by entrenched political views.

EY noted that, of the five UK financial services FDI projects which created more than 150 jobs in 2023, two were located in Glasgow.

This is also good news.

READ MORE: Ian McConnell: The sad, sad tale of a Scottish bank

Ms Dawe said: “These results underscore the enduring strength and confidence that investors continue to place in our financial sector: where traditional institutions and emerging fintech disruptors contribute to a vibrant, dynamic and forward-looking financial ecosystem.”

She also described Scotland's financial services sector as “a great example of resilience and innovation”.

Clearly, it has not all been plain sailing for Scotland in recent decades when it has come to its key financial services sector.

READ MORE: Ian McConnell: The thing Labour and the Conservatives don't want you to know

The loss of two major banking head offices from Edinburgh is among the great and lamentable challenges with which the nation has had to deal.

Royal Bank of Scotland has been renamed NatWest at parent company level and is now run from London.

Bank of Scotland merged in 2001 with Halifax to form HBOS, which had to be rescued by big four player Lloyds after the financial crisis took a lurch for the worse in autumn 2008.

The impact of the loss of such headquarters functions must not be underestimated.

That said, much of Scotland’s indigenous financial services sector has done well in recent decades. For example, there have been some big successes in fund management with some operations of real scale in this arena.

Meanwhile, Scotland’s success in attracting overseas financial services sector investors for such a long time now has also been very important for the broader economy, and will continue to be so.

Highlighting the strength and diversity of the financial services sector north of the Border, Mr Begbie said: “EY’s latest attractiveness survey demonstrates the continued strength and attractiveness of Scotland’s world-class financial services industry, based on the depth, breadth and maturity of our ecosystem, the quality of our universities and skills pipeline, and the leadership we are showing in priority areas like data, AI (artificial intelligence) and green finance.”

Of course, Ms Dawe and Mr Begbie are right to highlight the competitive nature of the FDI arena and to make it plain that Scotland has to keep doing what it is doing.

Ms Dawe said: “Financial services continues to be a pillar of the Scottish and UK economy – and is only increasing its position as [a] pivotal player on the international stage. Industry, government and education sectors need to continue collaborating to produce and retain world-class talent if we’re to harness cutting-edge technological advancements which create a competitive environment for further investment and growth.”

And Mr Begbie declared: “These results also show that we are operating in an increasingly competitive marketplace and there is no room for complacency. It’s vital that industry and government work closely and constructively to further build upon our longstanding reputation as a good place to do business, attract further inward investment and create new high-value jobs that benefit everyone in Scotland.”

He is right to highlight Scotland’s longstanding reputation as a good place to do business.

We should not underestimate the importance of this reputation to overseas investors, which do not appear to have been put off as some might claim by the greater income tax burden for higher earners in Scotland relative to other parts of the UK.

And there is certainly no sign that Scotland is resting on its laurels, as shown by its clear attractiveness to foreign investors in financial services and many other sectors.