Tobin tax would spell 'economic suicide' for the UK: Michael Spencer

The proposal for a EU-wide financial transactions tax (FTT), mooted by French president Nicholas Sarkozy and German chancellor Angela Merkel, has been slammed by the founder of the world's largest inter-dealer brokerage.

Describing the proposed tax as "economic suicide" for the UK, Michael Spencer, a former Conservative Party treasurer, and founder and chief executive of Icap, slammed the move and warned that his company would move out of London if the UK introduced the tax.

"This is another cynical threat by Sarkozy who knows this tax would overwhelmingly hit London as this is where trillions of dollars are traded each day in foreign exchange, equities, commodities and derivatives markets," said Spencer. "It would also be a huge fillip to New York and other centres like Singapore. It could only work if adopted globally."

According to Spencer, the move would destroy the City and cost the exchequer billions, but it would benefit Brussels. "Companies like Icap will simply move outside the EU if Nicolas Sarkozy and Angela Merkel push ahead with this silly tax," he added.

However, the prospects of Icap having to move out of the City - as London's square mile business hub is known - are bleak.

The British government has hinted that it would veto the tax if France and Germany bring the plan to a vote in the 27-member EU. "Any financial transaction tax would have to apply globally, otherwise the transactions covered would simply relocate to countries not applying the tax," a British government spokesman said.