EU exit 'could damage financial services'

With the European elections approaching, Britain's EU membership has been under more scrutiny than at any time since the 1975 referendum.

While UKIP are expected to do well and possibly even top the poll, the Conservatives have been emphasising their commitment to an in-out referendum on renegotiated membership terms, should they secure a majority at next year's general election.

However, the possibility of Britain leaving the union and having to then negotiate a new relationship with it from the outside has caused great consternation among some business groups.

They see such a prospect as fraught with danger as the UK may find it is in a disadvantaged position over trade and business, with the financial services sector particularly at risk from London being outside the union.

The extent of such concerns has been emphasised by research carried out by law firm Clifford Chance for lobby group TheCityUK, which has found a range of expert voices warning of major problems after an EU exit, the Financial Times reports.

Among these were concerns that Britain would still have to deal with most of Europe's regulations while having no influence on making them.

TheCityUK also predicted a major decline in London's financial centre status if Britain left the EU.

Group chairman Gerry Grimstone commented: “I do not believe the City’s pre-eminent position will survive if we lose our role as Europe’s financial capital and I do not believe we can maintain that position if we are not part of the single market.”

However, he was accused of "scaremongering" on this point by Matthew Elliott, the chief executive of rival pressure group Business for Britain, which favours the approach proposed by prime minister David Cameron.

Mr Elliott said this argument about London is similar to the discredited claim that the UK capital would be usurped by Frankfurt as Europe's leading financial centre unless Britain joined the eurozone.

Speaking in the City, Liberal Democrat chief secretary to the Treasury Danny Alexander argued that EU withdrawal "will kill our hard earned recovery stone dead," claiming it would lead to higher prices and unemployment.