Brussels is stifling City of London, Cameron claims

Prime Minister says banks are already under attack from 'badly formed regulations'

(PA)

David Cameron signalled new European battles ahead as he pledged to resist alleged attempts by Brussels to shackle the City of London in red tape.

The Prime Minister echoed claims that the emergence of a two-tier Europe following the financial crisis could result in a wave of EU directives that would harm the Square Mile.

The Government has said it is determined to prevent the 17 members of the eurozone acting as a bloc to thwart the interests of the 10 EU states, including Britain, that have retained their own currencies.

Visiting the Commonwealth summit in Australia yesterday, Mr Cameron said the City was already under "constant attack" from "badly drafted, badly formed" regulations and stressed its defence was a key objective for ministers.

"All countries in Europe pursue their national interest," he said. "Would the French and the Germans like a larger share of financial services in Paris and Frankfurt? Of course they would. Well, I want to make sure we keep them in London. That's why we fight very, very hard for our national interest."

Among the directives that have alarmed ministers are proposed new rules for hedge funds and limits on the scope of the work undertaken by the largest accountancy firms. The eurozone members agreed in Brussels this week to press ahead with closer fiscal integration and to hold regular summits. Britain accepts the logic of the moves, but has also stressed that it will challenge any attempt by the group to act as a caucus to champion solely its members' interests.

Nick Clegg, the Deputy Prime Minister, agreed yesterday that some of the planned EU proposals on City regulation affected Britain "disproportionately". He added: "We want to make sure there is a proper open level playing field for the City of London and for all British businesses in all sectors."

The prospect of new clashes over the City's future came as Mr Cameron condemned the excessive salary increases for senior executives.

The Prime Minister urged company boards to act "responsibly" following the disclosure that directors in Britain's biggest companies had seen the value of their pay packets leap by 49 per cent over the last year. He said: "This is a concerning report, particularly at a time when household budgets are very tight and people have difficult circumstances."

Ed Miliband, the Labour leader, said: "When people are struggling, when the middle is being squeezed, when people are seeing their living standards fall, it is not fair for those at the top to get runaway rewards not related to the wealth they have created."

But Sir Martin Sorrell, the chief executive of the advertising giant WPP, defended executives' remuneration – and insisted that his £1m base salary was "very low".

He added: "The base pay is then increased by a short-term incentive, which is an annual cash plan and a long-term incentive – a stock in the company in which I continue to invest."

Sir Martin told BBC Radio 4's Today programme that major companies operated in a global market and had to pay large sums to attract the most able staff.

"Look at what chief executives of media companies are paid in other parts of the world," he said.

"We are a worldwide company, we are the leading company in our industry, the comparison, whether you like it or not, is with other companies in the world."

Sir Martin Sorrell: The Tories' Pet Businessman

Sir Martin Sorrell may have enjoyed a spectacularly successful business career, but his claim that his £1m base salary was "very low" would not win him any prizes for diplomacy.

However, his comment is unlikely to harm his warm relationship with senior political figures – the entrepreneur is a member of David Cameron's business advisory board and has enjoyed the Prime Minister's hospitality at his Chequers country house.

The 66-year-old is also fully behind George Osborne's austerity measures – and has warned against excessive gloom over Britain's economic health.

Sir Martin built an estimated personal fortune of £148m – making him one of the wealthiest 500 people in Britain – from the most unlikely of origins.

In 1985, he took over WPP, a company making teapots and wire baskets for supermarkets, with a value of £1m. Today it is a global advertising and marketing group worth more than £10bn.

Sir Martin was appointed an Ambassador for British Business by the Blair government in 1997 and knighted three years later.

He moved WPP to Jersey for tax reasons three years ago. Today it is based in the Republic of Ireland.