Brexit concerns have bitten into the UK’s lead as Europe’s top financial services location for investors, new research shows.

The UK’s financial services industry has retained its title as Europe’s most attractive location for international investment, but its lead has narrowed due to fears over the impact of Brexit, according to a report by professional services firm EY.

The sector attracted 99 foreign direct investment (FDI) projects in 2016, the highest level since 2006 and an increase of 5 per cent on the previous year, the study shows. Germany, in second place, recorded 39 financial services projects, up 18 per cent year-on-year, and third-placed France registered 25 projects, up by a quarter.

London kept its place as the European capital for overseas financial services investment, recording 69 projects in 2016. Paris and Frankfurt recorded 19 and 12 respectively.

The largest source of foreign investment in UK financial services in 2016 came from the US, which provided a third of total investment. The second largest was China with 9 per cent.

As part of the report, EY surveyed 80 foreign investors across 20 countries worldwide. The UK’s quality of life, culture and technology were each cited by 83 per cent of respondents as key factors behind the country’s continued appeal. Britain’s thriving fintech sector was also a major pull, with 72 per cent of investors saying the industry had made the UK more attractive as an FDI destination.

Omar Ali, EY’s financial services leader, said that despite record levels of investment the outlook for 2017 and 2018 was less certain.

Loss of access to EU markets was cited by 42 per cent of investors as a major concern going forward. Tariffs on exports troubled 39 per cent of investors, while tariffs on imports were identified by 15 per cent as a potential issue.

“We can see from our study that investors have concerns about what Brexit may mean for the future and they want greater clarity on corporate taxation and incentives for foreign investors,” said Mr Ali.

“It’s vital that the Government does all it can to articulate a clear strategy around skills, market access and future trading arrangements to ensure the UK continues to be Europe’s preeminent financial centre for many years to come.”

Investors’ confidence in access to talent and local labour skills, and the stability of the UK’s social and political climate, has declined over the past 12 months, the report shows.