A senior European Union official warned on Tuesday of significant consequences for Britain's financial services industry and access to the single market if it votes to leave the bloc.
Britain would become a “supplicant” and end up with worse trading terms, Jonathan Hill, the EU’s financial services chief and a former Conservative Party leader of the House of Lords, said.
Prime minister David Cameron negotiated a "new settlement" with the EU last month in a bid to persuade Britons to back staying in the 28-country bloc when they vote in a referendum on EU membership on June 23rd.
The settlement includes safeguards that make it harder for euro zone countries to impose regulation on the City of London financial district, Europe's biggest banking centre.
Mr Hill said countries such as Norway that are outside the EU were in a position of "fax diplomacy" and being supplicants.
He told the UK parliament’s treasury select committee that he could not see why a Britain outside the bloc would get better trading terms for its financial sector than existing benefits.
“We would get worse terms...it’s a problem for the industry,” Mr Hill said, adding Britain outside the EU would still have to implement EU rules if its financial services wanted to do business there, but would have no say over their shape.
“Were we to leave, the consequences in terms of financial services and access to the single market would be very significant.”
Remaining EU states would want to use their competitive advantage when negotiating UK access to the single market as German and French financial services have different preoccupations to the City of London, he added.
And some securities clearing businesses were already “hedging their bets” by thinking of acquisitions elsewhere in the EU, Mr Hill said.
‘Competence creep’
Mr Hill faced scepticism from several lawmakers over the legally binding nature of the UK settlement, and its ability to protect the City of London.
The settlement gives Britain some leeway to tweak EU financial rules, but this can be overriden by EU powers to maintain wider EU financial stability.
The committee's chairman, Andrew Tyrie, said such powers didn't exist in the bloc's treaties.
“This agreement from a British perspective seems to have protection followed swiftly by what its detractors could easily describe as a Trojan horse of competence creep,” Mr Tyrie said.
Mr Hill, whose remit includes financial stability, said this was not the case and also dismissed doubts that the new settlement was not legally binding or that Britain would not be able to challenge EU rules easily.
Reuters