IMA head warns withdrawal from EU will hurt UK

Dick Saunders, outgoing chief executive of the Investment Management Association, says despite periodic “irksome” EU directives, the City “and other major UK financial centres like Edinburgh” have been net beneficiaries of legislation from over the Channel.

But, as David Cameron fought to rein in the EU budget last week and pressure grows in part of the coalition for a repatriation of powers from across the Channel, Saunders warned that his members would suffer from a British exit from the EU.

“Three years ago I would have been dismissive [of the prospect of Britain withdrawing]. I would be less dismissive today,” he said.

“I don’t have a crystal ball, and most of the political  mainstream and business want to stay in the EU. And some of the opposition to the EU is not well founded.

“But anti-European Union sentiment gets whipped up on the back of relatively small things. There’s a risk. And if withdrawal does come about, it would be a great pity.”

Saunders, whose members handle £3.9 trillion for the  nation’s pension funds and insurers, said it was vital the City retained a voice in Brussels.

He added: “It would certainly be a negative if we left. The UK is the capital market of  Europe, but we’d be in a position that we had to work with EU rules because our members operate internationally.

“However, we would not have any influence over those rules. It is a situation Switzerland sometimes finds itself in, and it would be difficult.”

Saunders, whose self-styled “torrid” 11-year tenure at the IMA has included 9/11, the credit crunch, the collapse of Lehmans and Northern Rock, and a double-dip recession, said he felt a failure of the  European single currency  remained an additional destabilising danger for the UK  asset management sector.

“A complete break-up [of the euro] is not something you can rule out. That would trigger a significant recession in our biggest trading partner,” he added.

Saunders also backed the Parliamentary Commission on Banking Standards probe  into British banking culture, despite Chancellor George  Osborne pleading last week for it not to “unpick” the legislative reforms in the works.

“The commission should scrutinise. The lobbying by the banks has been very powerful indeed,” he said. “We do live in a parliamentary democracy, and hopefully the work of  the commission will inform parliament.”

Saunders formally hands over to successor Daniel Godfrey, former director general of the Association of Investment Companies, on 1 December.