UK financial sector needs protection from EU regulation - business lobby

Britain's Prime Minister David Cameron speaks during a news conference with Egypt's President Abdel Fattah al-Sisi at Number 10 Downing Street in London, Britain, November 5, 2015.

Protecting the City of London from European Union financial regulation needs to be Prime Minister David Cameron's top job when he renegotiates Britain's ties with the bloc, a major British business lobby said on Friday.

Cameron must ensure Britain's large financial sector is not hurt by Britain not using the euro, said John Cridland, director-general of the Confederation of British Industry (CBI).

"At present the euro zone and City seem to rub up against each other like two tectonic plates," he told reporters.

Cameron is due to set out some of Britain's key demands in a letter to fellow EU leaders in the first half of next week. He wants to reshape Britain's ties with the bloc ahead of an in-out membership referendum due before the end of 2017.

"Many issues need resolving ... but the most important is Britain's place as Europe's financial capital outside the euro zone," Cridland said.

Cameron has already said he wants to bolster Britain's financial sector, which falls outside the regulatory ambit of the European Central Bank. The ECB has growing powers over financial firms in the 19 EU countries which use the euro.

Earlier this year Britain won a case at the EU's second-highest court to stop the ECB from barring British firms from clearing securities denominated in euros.

Cridland also rejected recent criticism from campaigners wanting Britain to leave the EU who complained that the CBI's relatively pro-EU stance was at odds with the views of its member firms.

"I have never claimed it is a consensus. Not every CBI member thinks the same ... but I do have an overwhelming majority of businesses that want to be in a reformed EU," Cridland said.

For now, the prospect of the referendum -- for which a date has not yet been set -- is not affecting investment decisions by businesses inside or outside Britain, he added.

This view was shared by the chairman of accountants Ernst & Young, Steve Varley, who spoke at the same media briefing.

"Not many of my clients are in their boardrooms talking about 'Brexit'," he said, using the short-hand term for a British exit from the EU.

"'Brexit' for me is something you talk about after the boardroom is finished. You talk about it over a cup of coffee, a cup of tea, or in the bar."

(Reporting by David Milliken; Editing by Gareth Jones)