The UK’s financial and professional services risked being damaged by "heavy handed" European regulation, the director general of the Confederation of British Industries (CBI) has warned.
Speaking at the organisation’s annual dinner on Thursday night John Cridland said proposals in Brussels for a financial transaction tax; the “solvency II” proposal for new capital requirements for the insurance industry; the capital requirements directive; and audit market and corporate governance reforms risk holding back the development of the sector.
“The likely effect of many of Brussels’ current proposals will be to damage the UK’s prospects for growth,” he said.
"Nowhere is this more acutely the case than for professional and financial services, which are being bombarded with unwarranted regulation."
Cridland focused on EU’s attempts to implement a “Tobin tax”, which would take skim off a small percentage from financial transactions, meaning that markets would be forced to directly contribute to the public purse.
The CBI director general said that such a tax would disproportionately affect the UK.
"The tax would be an incredibly blunt instrument, one that would increase the cost of capital for businesses, hold back their growth potential and raise minimal revenue in return," he said.
"And it’s a policy that will penalise the UK as Europe’s leading financial centre, diverting activity to financial hubs like New York, Singapore or Hong Kong. Believe me, there’s nothing its financiers would like to see more than London totalled by the Tobin tax."
He will also hit out at attempts to centralise policymaking on corporate governance in Brussels.
"Recent experience from the US and Sarbanes Oxley shows what happens with a law-based, prescriptive approach: you get minimal benefit but massive extra cost," he said.
"There’s a lack of understanding that set rules can’t work for every type of company, with dangers of reforms for financial institutions being imposed over listed companies, and talk of extending corporate governance rules to the unlisted sector.
"This appears to be yet another Brussels power grab, with EU-wide rules imposed when we know that national codes of governance are far more able to reflect different market places and shareholder bases."