THE Scot who chairs the London Stock Exchange, Donald Brydon, has played down fears about the impact of Brexit on the City saying the European Union needs the Square Mile to be successful.

Asked about suggestions that Brexit would spark a disastrous exit from London, Mr Brydon said it could take months before it becomes apparent what the UK leaving the union will mean for the City.

But it is already clear that London provides a vital service that it would be hard for other areas to replicate.

“What matters to the EU is that there is a successful City,” said Mr Brydon who has held senior positions in financial services giants such as Barclays and Axa in a career which has also included a spell as a director of Scottish Power.

Speaking after addressing the inaugural Edinburgh Economics Conference, Mr Brydon noted that the outcome of the Brexit negotiations could be impacted by the fact elections will be held in coming months in Germany and France.

But in his speech to the conference Mr Brydon appeared to cast doubt on the ability of cities such as Paris to replicate the role that London plays in ensuring global capital markets function effectively.

He observed: “Neither Germany or France has the same outward looking global perspective on finance as the City of London.”

Highlighting the role played by the London Clearing House in ensuring transactions are completed, he added: “The day after the [Brexit] referendum President Hollande suddenly became an expert on clearing.”

Mr Brydon said if the merger agreed by LSE group and Deutsche Boerse was completed it was not clear any functions would need to leave London.

He urged that greater recognition be given to the vital role equity funding plays in supporting the small and medium sized enterprises that are the engines of the UK economy.

“Blue chips have not created net jobs for nearly a decade now. It’s SMEs, entrepreneurs who are the heroes of the economy, the drivers of job creation so we need to support their growth,” Mr Brydon told the conference.

He added: “For the next Facebooks, Googles and Apples to be created here and to stay here we need a funding environment that moves away from seeing bank lending as a panacea.”

Mr Brydon reckons equity culture is often more suited to long term growth and innovation than bank debt. Firms that raise debt can find themselves having to focus too great a share of their resources on servicing their borrowings rather than pursuing growth.

The UK tax system advantages debt by allowing firms to set interest costs against their chargeable profits. “Equity is taxed four times,” said Mr Brydon, referring to corporation and capital gains taxes, the levy on dividends and the stamp duty payable on deals.

“To recalibrate our economy the penalisation of the asset class most able to fuel growth must be reversed,” he recommended.

The conference was organised by Edinburgh university’s Economics Society. It was held in the venerable Playfair Library.