City will lose access to UK ‘does a Norway’ on

A LEADING European banking official has warned that the City will lose its access to the single market if the UK does not sign up for a deal with the EU which would force it to accept freedom of movement.

François Villeroy de Galhau, a member of the European Central Bank’s governing council and governor of the Bank of France, said that London would not be able to keep its “European passport” if Britain does not agree a pact along the lines of the Norway settlement.

Speaking to a French radio station, Mr Villeroy warned: “The City cannot keep this European passport and clearing houses cannot be located in London either.”

His comments came amid reports that HSBC could move 1,000 jobs from London to Paris if the UK left the single market.

Leading ratings agency Moody’s has changed the UK’s long-term issuer and debt ratings to negative from stable and warned that the credit rating was at risk because of uncertainty. British banks were among the worst-hit stocks on Friday, as investors judged they could suffer in a Brexit. State-backed Lloyds fell by more than a fifth, while Barclays and RBS lost 18 per cent of their value.

The overall FTSE 100, London’s leading stock index, dropped by 3.2 per cent on Friday as traders reacted to the Leave vote, but over the entire week it had climbed by 2pc. Analysts pointed out that the firms making up the main index receive around three-quarters of their revenues from overseas, earnings that will be boosted when brought back to the UK given a fall in the value of the pound to its lowest in three decades.

Experts suggested that the more domestically focused FTSE 250 index gives a better guide to how money managers believe Brexit might affect the economy. This midcap index ended the