The financial services industry could suffer "irrecoverable collateral damage", unless the government defers and reconsiders its tax changes for foreign residents, the banking industry has warned.

In a letter to Alistair Darling, the British Bankers' Association said imminent changes to residence and domicile rules would have a "profoundly negative" effect on the UK's reputation for welcoming foreign talent, affecting its ability to remain the leading international financial sector.