Chapter: 2
Assessing Scotland’s growth accelerators

Assessing Scotland’s growth accelerators

2.1 Macroeconomic fundamentals and policy

2.2 Technological infrastructure and innovation

2.3 Demographics and labour supply

2.4 Regulatory and legal frameworks

2.5 Cross-border business and trade environment

2.1 Macroeconomic fundamentals and policy

Lower cost of living and doing business is a key advantage for Scotland’s financial services sector, while personal income tax is seen as the top barrier to growth

In brief

94% of financial services leaders view Scotland’s macroeconomic fundamentals and policy as important to the success of a fast-growing financial services sector.
Financial services leaders surveyed highlight Scotland’s comparatively lower cost of living and doing business as a key competitive advantage on the global stage.
The UK’s economic growth outlook is seen as a relative advantage for Scotland’s financial services sector, particularly amongst smaller firms (fewer than 500 employees).
However, Scotland’s high personal tax rates relative to the wider UK are viewed as a disadvantage for the Scottish financial sector.
In addition, financial services leaders continue to be concerned about the impact of potential fluctuations in interest rates or rises in the cost of living on their firms over the next five years.

Best practice in leading hubs

When considering the macroeconomic fundamentals and policy accelerant factor, best practice in fast-growing financial hubs is characterised by economic stability, facilitated by highly independent central banks, low corporation tax and simple tax systems that are easy to navigate and operate in.

Fast-growing Singapore and Switzerland, for instance, rank highly on the Tax Complexity Index, which measures the complexity of countries’ corporate income tax systems. Independent central banks, meanwhile, allow for greater long-term planning and efficient resource allocation.

In addition, access to affordable housing – particularly in urban centres – is seen as crucial to supporting fast-growing financial services hubs. A prominent example of affordable housing supporting financial services growth is Singapore’s Housing and Development Board, which provides housing for over 80% of the country’s population.^[7]

Scotland’s performance versus fastest-growing financial hubs

Scotland, as part of the United Kingdom, ranks behind fast-growing financial hubs including Switzerland, Singapore, Sweden and Ireland on the Tax Complexity Index^[8] and – in contrast to many of the fast-growing financial hubs – has seen an increase in its combined marginal corporation tax rate since 2013. However, Scotland benefits from having an independent central bank in the UK’s Bank of England, which provides a stable monetary policy and can facilitate long-term decision making and allocation of resources.

^[7]Housing and Development Board

^[8] https://www.taxcomplexity.org/

Views from Scotland’s financial services leaders

Scotland’s lower cost of living and doing business is a key appeal

Source: EY survey, September 2024

In terms of the cost of doing business we’re very competitive.” Adding that “Scotland’s talent base and world leading universities compounded its advantage”. This helps to position Scotland, he added, “as an attractive place for international financial services companies to establish operating bases.

Sandy Begbie
Chief Executive of Scottish Financial Enterprise

Services companies are essentially looking for access to a skilled, scalable labour force at reasonable prices. We should be able to continue to build based on that ecosystem.

Andrew Telfer
Managing Partner of Baillie Gifford

More than a third (36%) of respondents surveyed view Scotland’s lower cost of living and doing business as a competitive advantage for the market relative to international peers. Financial services leaders interviewed echoed this sentiment, emphasising the relatively lower costs of establishing and/or building operations in the Scottish market.

Growth in the wider UK boosts attractiveness of Scottish financial services

Nearly two in five (38%) respondents view the outlook for the UK’s economic growth as an advantage for Scotland’s financial services industry relative to its international peers. Respondents from smaller businesses with fewer than 500 employees were more likely to view the wider UK’s growth outlook as a competitive advantage, potentially reflecting the greater domestic focus of smaller firms relative to larger peers.

Overall, the UK’s economic recovery has been slower than expected, but growth is set to build steadily over the next two years, with GDP forecast to rise 1% in 2025 and 1.6% in 2026 and Scotland to grow 0.9% (2025) and 1.5% (2026). This economic recovery is expected to feed through to the financial sector as interest rates fall and appetite to borrow strengthens over time.^[1]

^[1]UK bank lending set for three years of growth | EY - UK

Affordability and accessibility of housing seen as a strength for Scotland’s financial sector, despite challenges with infrastructure

Financial services industry leaders surveyed highlighted the importance of affordable housing infrastructure to facilitate expansion, social mobility and employee retention. However, issues with housing and infrastructure have been cited as a key bottleneck for the nation’s growth, and in May 2024 the Scottish First Minister John Swinney declared a national housing emergency.^[1]

To maintain Scotland’s attractiveness, action is needed to raise the general quality of our inner cities, including the ease, transparency and efficiency of the planning processes, along with sustained investment in infrastructure more generally.

While housing infrastructure has been raised as a challenge to Scotland’s long-term growth, one-third (33%) of survey respondents view the housing stock affordability in major urban centres as an advantage relative to international peers, suggesting that the industry feels the market remains globally competitive.

^[1]BBC, Scottish government declares national housing emergency, 15 May 2024

Personal tax policy seen as Scotland’s top barrier to financial services industry growth

Source: EY survey, September 2024

One-fifth (20%) of survey respondents see challenges related to macroeconomics as key barriers to the growth of Scottish financial services over the next five years, with respondents highlighting particular headwinds around potential economic instability, interest rate fluctuations and cost of living challenges as threats to the sector’s expansion.

Notably, 46% of respondents view personal tax policies and frameworks as a disadvantage for Scotland’s financial services sector relative to international peers – the top disadvantage across all factors in the survey. Scotland’s personal tax framework differs considerably from the rest of the UK, with additional tax bands and a higher tax rate of 48% on the highest earners.

While tax bandings are proposed to remain unchanged, the Scottish Government Budget on 4 December 2024 proposed the Starter rate band will increase by 22.6% and the basic rate band increase by 6.6%. This will increase the thresholds for paying both the Basic and Intermediate rate of tax by 3.5%, coming into force in April 2025. Differences in taxation mean people earning over £30,318 pay more income tax in Scotland than they would in the rest of the UK, with the gap in taxation widening as incomes increase. Those earning £50,000 pay £1,528 more in Scotland than they would in the rest of the UK, and those earning £200,000 pay £7,463 more.

Scotland’s income tax system has more bands and higher rates than the wider UK

Data from the Office for National Statistics shows the average annual salary of a typical worker in the financial services industry in Scotland is £43,000, and this number rises significantly for more senior talent. The median gross annual salary for full-time workers across all sectors in Scotland is £33,332.^[1]

Given the higher than average income earned across the financial services sector, higher levels of taxation are likely to have a disproportionate impact on the financial services industry, with the potential to affect talent attraction and retention across all levels of the workforce.

^[1]Scottish Parliament

Scotland’s performance versus fastest-growing financial hubs

Scotland’s FinTech sector became the first in the UK, and only the third in Europe, to receive formal accreditation as a Cluster of excellence and is led by FinTech Scotland, the Cluster Management body. The European Secretariat for Cluster Analysis (ESCA) considers 28 economic indicators before making an award.^[1]

When considering technological infrastructure and innovation, Scotland compares well with other fast-growing financial hubs. It has an established FinTech cluster across Edinburgh and Glasgow and hosts the third-largest volume of FinTechs within the UK – helping to drive a national and international reputation in FinTech innovation. ^[2]

^[1]The European Secretariat for Cluster Analysis (ESCA) — ESCA

^[2] Kalifa Review of UK FinTech

Scotland is seen as a key contributor to the UK’s ranking fifth in the Global Innovation Index – behind only Switzerland, Sweden, the United States and Singapore^[3]ninth globally for real-time payments adoption,^[4] Scotland also has strong levels of digital connectivity, with superfast broadband covering 95% of premises.^[5]

More broadly, Scotland benefits from a network of high-quality universities, which strengthens its R&D capabilities and fosters the culture of innovation necessary to sustain a technology ecosystem.

^[3] Global Innovation Index 2024
^[4] CEBR analysis
^[5] Ofcom

Views from Scotland’s financial services leaders

FinTech Cluster and strategic partnerships driving competitive advantage for Scotland

Source: EY survey, September 2024

Scotland’s favourable FinTech Cluster is viewed as the market’s top competitive advantage in the context of technological infrastructure and innovation, with more than half (56%) of survey respondents citing this factor as a competitive strength for the market relative to international peers. This is followed by 41% citing strategic partnerships between academia, industry and government and 39% referencing the regulatory framework supporting innovation.

Scotland is home to a well-developed FinTech Cluster, underpinned by more than 250 operational FinTechs including startups, scaleups and large organizations. This is supported by 16 Scottish universities with Informatics and Computer Science departments across the market^[1] – including five universities which currently offer specialist graduate degrees in FinTech. There are also a number of accelerator programs seeking to provide office space and support to emerging FinTech companies, such as Scotland’s Techscaler programme, delivered by CodeBase and the Scottish Government.

2.2 Technological infrastructure and innovation

Scotland’s FinTech Cluster is a key strength, but scaleups need more support to grow

In brief

94% of financial services leaders in Scotland view technological innovation and infrastructure as important to the success of a fast-growing financial services sector.
The favourable FinTech Cluster is the most widely cited competitive advantage when asked about Scotland’s technological infrastructure and innovation. However, many financial services leaders highlighted challenges to accessing capital for early and scale- up stage FinTechs as a potential disadvantage relative to international peers.
Financial services leaders – particularly those from larger companies – cite insufficient levels of government support and investment in R&D as a potential disadvantage for Scotland relative to international competitors.
Survey respondents also highlight the challenge of keeping up with the pace of technological change, cybersecurity threats and data privacy concerns as potential barriers to the growth of their firms over the next five years.

Best practice in leading hubs

Strong support for technology and innovation is a hallmark of fast-growing financial services hubs, with all except Poland ranking in the top quartile of the Global Innovation Index.^[1]

Strong performance in technological infrastructure and innovation is characterised by accessible and plentiful capital for startups and growth companies, highly effective capital management and access to technological infrastructure such as real-time payments (RTP) networks and full fibre broadband – including in rural areas.

^[1]Global Innovation Index 2024

Collaboration with academia, industry and government is a key strength for Scotland’s financial sector

More than two-fifths (41%) of survey respondents view strategic partnerships between academia, industry and government as key strengths for Scotland over its international peers. Financial services leaders interviewed highlighted organizations such as FinTech Scotland and the Smart Data Foundry as key in fostering partnerships and innovation and also emphasized the role that Scotland’s universities and colleges play in catalyzing and supporting innovation.

^[1]FinTech Scotland

We’ve got more world-class universities per capita than our peers, and that breeds a level of education and desire around technology. It allows companies to engage with those universities for joint research, joint ideas and joint innovation much more easily than other countries can.

Koral Anderson
Head of Transformation at Barclays Scotland

Source: EY survey, September 2024

Keeping pace with technological change and investment in R&D could hinder growth

When asked about the potential barriers to the growth of their firms, 17% of survey respondents cited challenges related to technological infrastructure and innovation, particularly around keeping pace with rapid technological change in fast-changing areas such as FinTech and AI, in addition to the growing threat of cybersecurity risks and data privacy.

While respondents view Scotland’s FinTech Cluster as a key advantage over international peers, more than a quarter (28%) highlight challenges around access to capital for early-stage FinTech startups and scaleups. This view was particularly prevalent among smaller firms – those with fewer than 500 employees – and was reinforced through the course of our interviews with senior stakeholders across the market.

In addition, more than a third (36%) of respondents perceive the level of government support and investment in R&D for innovation and sustainable finance initiatives as potential headwinds to Scottish financial services growth – a view that is particularly prominent among respondents from larger firms. This perceived lack of support is an unexpected finding, as the UK provides the most significant level of tax relief and total public support in the OECD for business R&D as a percentage of GDP, according to the latest figures from the OECD.^[1]

^[1]OECD

One of the barriers that we hear about frequently is access to investment to scale. Broader access to strategic investment in Scotland is important and, currently, it is easier to access that level of funding in locations such as London.

Nicola Anderson
CEO of FinTech Scotland

2.3 Demographics and labour supply

Scotland is home to inclusive, skilled and highly educated talent, but barriers to retaining top talent persist

In brief

More than nine in ten (91%) financial services leaders view demographics and labour supply as important to the success of a fast-growing financial services hub.
The diversity and inclusivity of Scotland’s labour force is regarded as a key advantage for the market, fostered by efforts to support gender equality in the workforce and the breadth of routes into financial services employment through universities and apprenticeship programmes.
However, respondents from larger financial services firms cite challenges around attracting and retaining top-tier international talent as a potential disadvantage for Scotland compared with international peers, in addition to challenges with the immigration system when hiring skilled talent.

Best practice in leading hubs

Strong demographics and labour supply in fast-growing financial hubs are characterised by a large working age population with high levels of education and skills in critical areas such as science, technology, engineering and mathematics. Fast-growing financial hubs often demonstrate high levels of educational achievement, with four of our top five markets – Korea, Singapore, Luxembourg and Poland – showing levels of tertiary educational attainment significantly above the OECD average.^[1]

These are often complemented by proactive immigration policies to help attract skilled talent from overseas, such as Singapore’s ONE pass, which makes it easier for foreign high-earners and high achievers to move to the country.

^[1]CEBR analysis, OECD

Scotland’s performance versus fastest-growing financial hubs

Universities in Scotland consistently rank highly in global higher education rankings. For example, the University of Edinburgh and the University of Glasgow are often ranked among the top 100 universities globally in major rankings like the QS World University Rankings^[1]and the Times Higher Education (THE) World University Rankings.^[2] The University of St Andrews also enjoys a strong reputation, often ranked in the top 100 globally, especially noted for its humanities and social sciences programs. Scotland’s universities also contribute to the United Kingdom’s tertiary educational attainment, which exceeds the OECD average,^[3]with close to 60% of 25- to 34-year olds achieving this level of education. However, global competition remains high and there is room for Scotland to build on its strengths to grow its leadership position in tertiary education.

At the same time, Scotland is forecasted to see its working age population decline in the coming years. While this is in line with many other developed markets, Scotland’s decline is expected to be at a faster rate than peers such as Ireland.^[4]

^[1]QS World University Rankings 2025: Top Global Universities | Top Universities

^[2]World University Rankings 2025 | Times Higher Education (THE)

^[3]OECD

^[4]CEBR analysis, World Bank

Views from Scotland’s financial services leaders

Progress in diversity, equity and inclusion is an advantage for Scottish financial services

Source: EY survey, September 2024

Close to a third (32%) of survey respondents view the cultural diversity and inclusivity within the Scottish financial services workforce as a competitive advantage over international peers, with a further 32% or respondents citing a particular strength in the sector’s gender balance.

Generally speaking, Scotland leads the UK for gender equality at work, with the lowest gender pay gap according to Office for National Statistics (ONS)^[1]. As of the most recent ONS update, Scotland’s gender pay gap was 2.2% – far below the UK average of 7.0%.^[2]

^[1]Gender pay gap in the UK – Office for National Statistics
^[2] Annual survey of hours and earnings

Equality within workplaces is supported by the Scottish Government, which offers a range of initiatives including broader access to funded early learning and childcare hours compared with the rest of the UK,^[3] and tracking progress via the Gender Equality Index.

Efforts to improve diversity, equity and inclusion are evident in a number of the fast-growing financial services hubs. Sweden, for example, has successfully grown its female labour force participation from 76% in 2010 to 82% in 2023^[4] through measures such as improved access to childcare and robust parental leave policies.

Financial services leaders interviewed highlighted the diversity of Scotland’s talent pool as a competitive advantage, bringing a broader range of capabilities, skills and perspectives to the sector.

^[3]Funded early learning and childcare - Early education and care - gov.scot (www.gov.scot)
^[4]World Bank

A huge benefit is Scotland’s relative size and the efficient business ecosystem that has been cultivated – the resulting ease of building networks is something we know is admired by other parts of the UK and even further afield. The network ecosystem means it’s easier to make connections and knock on doors that would otherwise take a long time to reach elsewhere.

Sue Dawe
Head of Financial Services, Scotland, EY

Scotland has a broad talent pool, enabled by multiple routes into industry

Within Scotland’s financial industry, survey respondents believe the Scottish education pipeline and retention of top talent are key competitive advantages for the market, with more than two-fifths (42%) respondents believing Scotland has a strength in retaining talent amidst competition from international financial centres.

When reflecting on the talent pipeline, nearly a third (32%) of respondents regard Scotland’s strong pipeline from schools, colleges and universities as a competitive advantage; and more than two-fifths (41%) believe Scotland’s retention of university graduates in the domestic workforce is a key advantage compared with international peers; and more than one-fifth (22%) view the presence of specialised training programmes as a competitive advantage.

In addition, almost a third (32%) of respondents view the availability of a workforce with skills in key areas such as emerging technologies and Economic, Social and Governance (ESG) as a competitive advantage for Scotland relative to international peers.

We’ve got good pathways for different types of labour supply, whether that’s young people looking for
apprenticeships or graduate opportunities. We’ve got good higher education institutes and good partnerships between the private sector, colleges and universities – I’ve found them incredibly open and willing to work with us in tailoring content and meeting our skills needs for the
future.

Koral Anderson
Head of Transformation at Barclays Scotland

Attracting and retaining talent seen as a challenge for Scotland

Source: EY survey, September 2024

Despite respondents seeing strength in Scotland’s talent pipeline from schools, colleges and universities, 36% of respondents cited challenges for the Scottish sector in attracting and retaining top-tier international talent, with leaders from firms with more than 500 employees more likely to see this as a challenge.

A further 24% also cite challenges around low government support for upskilling and re-skilling initiatives and almost one in five respondents feel Scotland’s immigration policies for skilled workers are a potential disadvantage for the sector compared with international peers. A number of senior stakeholders also raised concerns about challenges to securing visas for talented graduates and senior hires.

As well as attracting new talent it is also about retraining our existing talent. I think one of the biggest challenges is forecasting what skills we are going to need, and how to keep up with a fast-evolving sector.

A lot of our skilled people are coming as graduates from universities around the UK, as well as from countries all over the world. So, we’ve got to make sure we’ve got the visas or immigration flexibility to be able to actually employ them. Having those flexibilities is very important to us.

Sue Dawe
Head of Financial Services, Scotland, EY

Andrew Telfer
Managing Partner at Baillie Gifford

2.4 Regulatory and legal frameworks

Regulatory environment seen as supportive of innovation in Scottish financial services

In brief

93% of Scotland’s financial services leaders view supportive regulatory and legal frameworks as important to the success of fast-growing financial services hubs around the world.
35% of survey respondents view fast and consistent policymaking in Scotland as an advantage relative to international peers.
The regulatory environment is viewed as supportive to the growth of green and sustainable finance in Scotland, with key initiatives including the independent Scottish Taskforce for Green and Sustainable Financial Services and the Scottish Government’s Green Industrial Strategy contributing to the market’s competitive strength.

Best practice in leading hubs

A robust regulatory and legal framework is characterised by transparency in governance, strict adherence to the rule of law and low levels of corruption. Fast-growing financial hubs demonstrate stable legal systems with predictable enforcement, providing reassurance to investors and financial institutions.

The majority of the fastest-growing financial services hubs, including Singapore, Luxembourg and Sweden, also rank highly on the World Justice Project’s Rule of Law Index,^[1] indicating low levels of corruption in the forms of bribes, informal payments and other forms of financial inducement.

^[1] WJP Rule of Law Index

Scotland’s performance versus fastest-growing financial hubs

Similarly, Scotland ranks well in the Rule of Law Index with a weighted average score of 0.78 – 15^th in the world overall. In financial services, Scotland and the broader UK are highly regarded for gold-standard regulation, led by the Financial Conduct Authority’s (FCA).

Views from Scotland’s financial services leaders

Regulation a key support of green and sustainable finance in Scotland

Source: EY survey, September 2024

Almost a third (32%) of survey respondents view the regulatory and legal frameworks that support the growth of green and sustainable finance as a competitive advantage for Scotland relative to its international peers. This reflects the Scottish Government committing to green and sustainable finance as a key strategic priority and highlighting it as an opportunity for economic growth in its Programme for Government.^[1]

Plans to drive the growth of the sector were also outlined in the Government’s September 2024 Green Industrial Strategy, including the development of a national project pipeline of investment opportunities and initiatives to raise Scotland’s profile as a destination for green investment.^[2]

^[1]Serving Scotland: Programme for Growth 2024-25

^[2] Green Industrial Strategy

UK financial services regulatory environment continues to benefit Scotland

More than a third of respondents (35%) regard the consistency and speed of policymaking across the Scottish sector as competitive advantage for the market, with a further 35% highlighting the benefit of the UK’s wider financial services regulatory environment to Scotland.

The UK has a global reputation for gold-standard financial services regulation that also helps enable innovation and growth. The Financial Conduct Authority’s (FCA) has an established presence in Scotland, with over 250 staff in its Edinburgh office and a Head of Department for Scotland overseeing the impact of FCA policies on Scotland.^[1]

^[1] FCA Annual report

The UK regulatory and legal framework is world-class – it’s consistently applied, it’s understood, and it’s held the test of time. I would say those are positives for Scotland and where we are today.

Koral Anderson
Head of Transformation
at Barclays Scotland

A particular asset, with the potential to become really important, is the Financial Regulation Innovation Lab. It’s a UK-wide resource to look at how regulation can be delivered differently to the way it’s been done in the past, through encouraging innovation in the [FinTech] area. That has real potential to be a really important asset to Scotland.

Sandy Begbie
Chief Executive of
Scottish Financial Enterprise

The FCA’s Regulatory Sandbox^[1] – an initiative that helps enable firms to test new products, services and business models with real customers under regulatory supervision – is viewed as an important enabler of FinTech innovation in Scotland and is a crucial driver of the UK’s international prominence as a global leader in FinTech investment.^[2]

Financial services leaders interviewed echoed the strength of Scotland’s regulatory environment, citing the establishment of the Financial Regulation Innovation Lab (FRIL) in Glasgow in January 2024 as a reason for further optimism. FRIL demonstrates the actionable benefit of a FinTech Cluster by extending collective collaboration on Regulation & Innovation (R&I) beyond one firm and one university.

^[1]FCA Regulatory Sandbox

^[2]Dealroom

The Financial Regulation Innovation Lab is pioneering industry-driven innovation environment, accelerating technology adoption in financial regulation. The outcomes are driving new tech enabled solutions that are adopted by industry while also enabling FinTech SMEs to accelerate product market fit and in some cases reduce product development time by up to 9 months.

Nicola Anderson
Chief Executive of
FinTech Scotland

High personal tax continues to be a key barrier to growth

Once again, more than two-fifths (42%) survey respondents highlighted Scotland’s tax policy on remuneration for high earners as its most significant regulatory disadvantage versus other markets, with senior leaders interviewed citing higher income taxes as a prominentbarrier to attracting senior-level talent.

What you’re starting to hear now is the phrase “Scottish allowance” or “Scottish premium”. I would say that’s starting to become a real issue.

Sandy Begbie
Chief Executive
of Scottish Financial Enterprise

Source: EY survey, September 2024

2.5 Cross-border business and trade environment

Proximity is an advantage for Scotland but barriers to trade with Europe present challenges

In brief

86% of financial services leaders in Scotland view the cross-border business and trade environment as important to a fast-growing financial services sector.
Scotland’s proximity to other financial services centres, namely London, Dublin and Paris, is seen as an advantage compared with international peers.
However, diminished access to the European market post-Brexit is seen as a relative disadvantage.

Best practice in leading hubs

Strong performance is characterised by low levels of friction to international investment, financing and trade and having few restrictions on the flow of investment and internationally competitive tax frameworks. Fast-growing financial hubs such as Singapore, Ireland and Switzerland rank highly on the Heritage Index of Economic Freedom.^[1]

As a result, some of these markets including Ireland, Luxembourg, the Netherlands and Singapore have been designated as offshore financial centres – countries or jurisdictions “providing financial services to non-residents on a scale that is incommensurate with the size and the financing of its domestic economy.”^[2]

^[1]Heritage Index of Economic Freedom
^[2]Ahemad Zorome, Concept of Offshore Financial Centers

Scotland’s performance versus fastest-growing financial hubs

Scotland scores highly for business and trade freedom in the Index of Economic Freedom,^[1] indicating relatively few restrictions to international investment. This helps to foster an attractive investment environment and draw international capital, bolstered by Scotland’s dividend and capital gains exemptions for qualifying participants – a characteristic it shares with the wider UK and other fast-growing financial hubs such as Sweden.

However, global competition is fierce and there are recent indications that the Bank of England is looking to take further steps to attract international capital, as seen in proposals to set up a “concierge service” to facilitate financial services companies to establish themselves in the UK – something Scotland could in turn benefit from.^[2]

^[1] Heritage Index of Economic Freedom
^[2] Bank could start Singapore-style ‘concierge service’ for foreign firms

More than two-fifths (43%) of survey respondents view Scotland’s proximity to major financial centres in Europe as an advantage relative to international peers, reinforcing the important role that Scotland’s geographic positioning continues to play in attracting firms looking for cost-efficient proximity to broader European markets.

Our research found that fast-growing financial services hubs consistently demonstrate lower constraints on the flow of investment capital. In the Index of Economic Freedom’s ranking of countries with greatest levels of investment freedom, Scotland and the wider UK rank highly, at 26^th overall^[1], while top ranking fast-growing financial services hubs Luxembourg and Singapore rank first and second, respectively.

In addition, more than a third (36%) of respondents view the ability to do business and partner with global markets as a competitive advantage for Scotland relative to international peers, emphasising the Scottish sector’s integration with global markets.

^[1] Index of Economic Freedom

Views from Scotland’s financial services leaders

Geographical proximity and ability to do business with global financial centers is an advantage for Scotland

Source: EY survey, September 2024

A further 38% of respondents’ regard Scotland’s position within the UK market, which grants easy access to London, as a key advantage over international peers.

This is evidenced by strong levels of inbound investment (across all sectors) into Scotland. According to the latest EY Attractiveness Survey, Scotland continues to attract the highest number of UK foreign direct investment projects outside of London, recording a decade-long stretch and attracting nearly 16% of UK project share.

Challenges posed by Brexit remain a headwind for

Scottish financial services

Source: EY survey, September 2024

More than a third (36%) of respondents regard a perceived lack of access to the European market as a disadvantage for Scotland relative to international peers, largely reflecting the challenges posed by Brexit and ongoing regulatory divergence.

Stakeholders interviewed also highlighted the uncertainty caused by Brexit, particularly its impact on trade relations with the EU, as a major headwind for the sector. In particular, the financial services leaders interviewed called out the loss of the passporting regime, which allowed UK firms to operate in the EU and European Economic Area without additional authorisation, as a significant shift.