Euro drama at Westminster, but what does the City think?

In Brussels on Thursday, the prime minister found himself in a minority of one, isolated over the issue of a new transactions tax he believes would damage the financial services sector in this country.

For the first time, Britain used its veto to stop the EU’s other 26 countries from moving forward. Or so Mr Cameron hoped. The 26 simply said they would take action together, without Britain.

The UK will not be party to the financial transactions tax (FTT), but it has been left out in the cold as the EU tries to resolve its debt crisis. So what does the City think?

This conflict is an improvement on warfare. Jon Moulton, Better Capital

Asked for his opinion, Jon Moulton, founder and managing partner of the private equity firm Better Capital, sent Channel 4 News an email saying bluntly: “Simply the FTT is bad for the UK and helpful to other European centres. This conflict is an improvement on warfare ….”

‘Mixed feelings’

Vicky Redwood, chief UK economist at Capital Economics, said the City had “mixed feelings” about what Mr Cameron had achieved. “Some people are saying the UK has less of an influence over future decisions regarding changes to financial services at a European level.”

Ms Redwood added: “It’s not primarily about the Tobin tax (FTT) because we already have the power of veto because it’s a tax matter. What David Cameron was trying to do was get a veto over future changes to legislation, rather than just the Tobin tax. He has come out of it without any increased protection for the financial services sector.”

Read more: Ten curiosities about David Cameron's veto

Chris Scicluna, head of economic research at Japanese investment bank, Daiwa Capital Markets, said it was “too soon to tell” what would happen next, whether the Brussels summit was “the best we could hope for or a bit of a cock-up”.

Mr Scicluna said that while Britain still had a veto in some areas, in others, qualified majority voting (QMV) was the rule. “The City has a degree of protection, although at the margins there will be policies brought forward under QMV at which we have probably lost some goodwill and will lose out going forward under proposals from the European Commission.”

‘Not good’

Mr Cameron had been right in principle to insist that British concerns were considered, but the outcome was “in many ways” bad. “It’s not good to have a new forum from which you’re excluded.”

Mr Scicluna said the City would have been adversely affected if an EU-wide tax had been agreed. “Lots of transactions would just leave the EU and thus the City. There are other places outside the EU where such transactions could take place. There would be a significant number of transactions moving.”

He has come out of it without any increased protection for the financial services sector. Vicky Redwood, Capital Economics

‘British isolation’

Paul Kavanagh, a partner at Killik and Co stockbrokers, said the City was “less concerned than the headlines”, adding: “Everyone’s jumping to early conclusions and I suspect that this will play out over the next few months. It sounds like he didn’t really have any other option but to do what he did last week.”

Mr Kavanagh said it was noticeable bank share prices had fallen in early trading, but this may have been due to gloomy growth forecasts for the British economy from Standard Chartered Bank. Even so, “it does beg the question about the isolation of Britain”.