The head of Britain's biggest business group said yesterday that City institutions should not be made the scapegoat for the credit crisis, which could jeopardise the Square Mile's role as the world's leading financial centre.

Richard Lambert, Director-General of the CBI, told City critics: “We mustn't forget the huge benefits that a competitive financial market has brought to businesses and consumers over the past 20 years. It's an area where we are world leaders ... We mustn't jeopardise all this in a rush to find scapegoats.”

Mr Lambert said political temptations for a sweeping City clean-up should be tempered by the US experience of its Sarbanes-Oxley legislation, introduced after a wave of corporate corruption but which is now seen as having impeded corporate America.

“Recovering markets need help, not a handicap,” he said.

Mr Lambert also cautioned against the threat that the regulatory backlash now facing financial institutions after the credit crisis might lead to more red tape for other businesses.

He dismissed suggestions that the financial crisis indicated “that we need a fresh look at regulation and state intervention of all kinds” in an attempt to address a perceived malaise in the market economy.

“Some trade union leaders were even talking longingly about a return to the 1970s,” he said.

“We have to make sure that everyone who matters accepts that this idea is total nonsense.

“We do need to take a calm look at regulation in financial markets in the months ahead - but we must be clear that what has happened there has no bearing on businesses elsewhere.”

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