Most City institutions think it does not matter to them whether Britain joins the euro, a private report commissioned by the Corporation of London has found.
A study of financial institutions' views of London's competitive position, not due to be published before the Chancellor of the Exchequer, Mr Gordon Brown, delivers his initial euro assessment next Monday, is expected to put euro entry low on their list of priorities, with a majority of institutions indicating that European regulation is a bigger issue.
The City has traditionally been seen as being a strong supporter of euro entry. But when Mr Brown sets out the government's decision regarding the euro, he is expected to say the test of whether entry would benefit the financial services industry is the only one of the Treasury's five tests that has been passed.
But the indifference of most financial institutions weakens the pressure to join.
The Prime Minister, Mr Tony Blair, yesterday attempted to reach a consensus on the euro when he chaired a cabinet session on the subject.
After the meeting Mr Brown said: "We are all resolved that nothing will be done that will put the stability of the British economy at risk. I look forward to the debate in the country that will follow."
A spokesman for Mr Blair echoed Mr Brown's comments, saying the meeting marked the end of a "very thorough and detailed process".
The euro decision "will be made in the national economic interest", he added.
The Corporation of London commissioned the Centre for the Study of Financial Innovation (CSFI), a think-tank to assess the City's position relative to other financial centres such as New York and Frankfurt.
It has interviewed 75 leading institutions about a wide range of factors including the availability of staff, transport and other infrastructure, the breadth of markets and regulation, as well as Britain's relations with the euro zone.
Mr David Lascelles of the CSFI said: "The bigger and more pressing issue than the euro is the rising tide of anti-EU feeling, caused by the intrusiveness of EU regulation and its inappropriateness to the City's needs."
He said many institutions felt that EU legislation was being tailored for the needs of the retail markets on the Continent, rather than the predominantly wholesale businesses in London.
Sir Brian Williamson, chairman of Euronext Liffe, said on Wednesday he did not believe that Britain would be more able to shape that legislation to its advantage from inside the euro.
"I think the threat comes from the Continental approach to regulation, rather than the currency," he said.
"Joining the euro might give a cosier feeling to some, but we would still be up against a different legal approach."
However, Mr Chris Huhne, vice-chairman of the City in Europe, a pro-euro group, said the CSFI study failed to reflect how European financial markets would evolve.
"The City has the chance to become the New York of the euro area, with far bigger equity and bond markets than exist at present, but that will not happen if we fail to join the euro," he said. - (Financial Times Service)
