Leading City figures warned on Wednesday that the political turmoil surrounding Gordon Brown was threatening his government’s ability to defend them from tough new European rules that could make it harder for them to compete with rivals abroad.

A number of UK bankers and brokers have told the Financial Times they believe Mr Brown and his ministers are too weak and distracted by their domestic political travails to lobby effectively in Europe. Partly as a result, some banking and private equity groups are asking their counterparts elsewhere in Europe to lobby their home governments rather than rely on the UK to deal with the Continent, as they have in the past.