By Mark Kleinman, City Editor
A European business lobbying group whose members include Britain's CBI has delivered a fresh broadside against Europe's planned financial transactions tax (FTT), saying it will damage competitiveness and undermine the management of public debt.
In a letter to European Union finance ministers, Markus Beyrer, director-general of BusinessEurope, warned that the introduction of the FTT would "make investors both here and across the globe question whether policy-makers are really serious about putting in place a competitive business environment".
BusinessEurope's members comprise 41 industrial and employers' bodies in 35 countries, which collectively represent tens of millions of workers across the Continent.
Its new lobbying against the group follows the recent announcement that George Osborne, the Chancellor, would oppose the FTT in the European Court of Justice amid concerns about its impact on the City and the rest of Britain's financial services sector.
In the letter dated May 6, a copy of which has been obtained by Sky News, Mr Beyrer outlines four main arguments against the FTT, which is expected to raise as much 35bn Euros annually through a levy on most financial transactions.
"The tax will raise the cost of financing for firms, and hence undermine investment," he wrote. "The tax in particular reduces liquidity and therefore the attractiveness of new issuances... leading to a fall in corporate investment of at least 1.8pc."
He also warned that the new levy would damage the competitiveness of European companies by rendering more difficult their essential risk management activities.
"Treasury management, intragroup transfers and the hedging of currency, interest-rate and raw-materials risks would all become more expensive. This will penalise essential day-to-day corporate activities and will in particular lead to higher risk exposure due to less hedging."
The letter from BusinessEurope warned that the tax would also potentially increase risk in the financial system by forcing some activities outside the European Union to "jurisdictions potentially less well-regulated".
Mr Beyrer also said the new tax would significantly undermine the management of public debt, particularly by taxing the transaction of sovereign bonds on secondary markets.
"Ultimately it would be EU citizens who would pay this tax through both pensions and poorer employment opportunities... By withdrawing their support for this poorly-advised initiative, European leaders still have time to show they are serious about putting Europe on a strong recovery path."
The mobilisation of a lobbying group with such extensive geographical reach and which represents a much broader spectrum of business than the financial sector is significant, although the prospects of a wholesale climbdown from the imposition of the FTT are thought to be remote.
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