Britain would face trade barriers if it left the European Union and its single market, the EU’s financial services commissioner Jonathan Hill said on Monday.
Hill, a Briton appointed to the European Commission by UK Prime Minister David Cameron, stepped up warnings on the consequences for the City of London financial district if Britain votes to leave the 28-country bloc in a June 23 referendum.
Financial services are Britain’s biggest export earner and are flourishing, with London last year rated the world’s most competitive financial center by the Global Financial Centres Index, Hill told students at the London School of Economics.
This was hardly a sign of a City drowned or strangled in red tape as is sometimes claimed, he said.
“If Britain leaves it is certain that there will be barriers to trade and that will damage the British economy, jobs and growth,” Hill said.
Outside the EU, British banks and other financial firms would have to set up a separate subsidiary with its own capital within the trading bloc, which is “neither cheap nor simple,” he said.
His comments came as Prime Minister Cameron and finance minister George Osborne also warned on Monday of the economic consequences if Britain votes to leave the EU, or Brexit.
Hill disagreed with those campaigning to leave the EU, or Brexit, who say Britain’s financial sector could flourish outside the EU by negotiating attractive trading terms.
“If Britain chooses to become a competitor rather than a partner, why wouldn’t they (the EU) seek a competitive advantage in the new relationship? To build up their financial services sector,” Hill said.
The Grassroots Out campaign for leaving the EU, however, said separately that Brexit was the best option for financial services in Britain.
“If we stay in the EU, the City will be under siege. It will have to deal with wave after wave of attacks from Brussels, but will be powerless to fight back,” said Steven Woolfe, financial affairs spokesman for the UK Independence Party.
Woolfe, a member of the European Parliament, said the financial services sector could add 25 billion pounds ($36 billion) to London’s output and create more than 200,000 jobs across Britain by 2020 if free of burdensome EU regulation.
A Franco-German “axis” was seeking to favor French insurers and German banks over institutions in the City of London under new EU rules being kept out of sight until after the referendum, said Wolfe, a former hedge fund lawyer and former adviser to Barclays bank. He did not elaborate.
Brexit would allow Britain, Switzerland and the United States to join forces and block bad EU regulation that affects their countries as well, Woolfe added.
The British government has negotiated reforms which it says will stop Brussels from imposing financial rules on the City, but Woolfe said they contain no guarantees for British financial services.
($1 = 0.6896 pounds) (Reporting by Huw Jones; editing by Mark Potter and Susan Fenton)
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