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11 eurozone countries intend to introduce the tax on stock, bond and derivatives transactions next January to help to make banks pay for aid they received in the financial crisis.
The City of London Corporation, home to a large chunk of Britain's financial services industry, Europe's biggest, said a study it commissioned estimates that the cost of capital will go up even for countries not imposing the tax. "The financial transaction tax is an ill-conceived idea that risks significantly damaging economic prospects across Europe", said Mark Boleat, chairman of the corporation's policy committee. "Not only would it adversely affect the cost of sovereign debt but it would also make it more difficult for businesses across the continent to access funding."
Commissioned on behalf of the International Regulatory Strategy Group and authored by London Economics, the study said the tax would distort competition and have a greater negative impact on returns from corporate and sovereign debt from non-participating EU states.