The furore over Alistair Darling’s scrapping of capital gains tax and changes to the rules for non-domicile taxpayers has undone Labour’s carefully-nurtured reputation as a friend of the City, a new survey suggests.

Labour’s big business charm offensive – a hallmark of the party under Tony Blair – appears to have spluttered to a halt, as only one in eight institutional investors said the party was the friendliest to big business.

David Cameron’s Conservative Party was identified as the party most friendly to big business by 69 per cent of respondents, who included fund managers and analysts.

The survey was conducted last week before Mr Darling’s attempt to quell the uproar from business leaders by announcing plans he was to introduce retirement relief.

George Osborne, the Shadow Chancellor, was selected as the politician “most understanding of how the City operates”, capturing 26.8 per cent of the vote ahead of Gordon Brown with 18.8 per cent.

The approval of Mr Osborne, widely credited with stealing a march on Labour with his plans to raise the threshold on inheritance tax, stands in stark contrast to David Cameron with 3.6 per cent, who languishes behind Mr Darling who had 4.5 per cent of the vote.

Ed Balls, the Schools Secretary who was Treasury Secretary under Gordon Brown, finished in third place as the most City-friendly politician, with 13.4 per cent of the vote.

Mr Darling provoked outrage among business leaders over his decision to replace the 10 per cent taper relief rate, to which taxpayers are entitled if they hold earnings for two years, with a flat 18 per cent rate.

The move, designed to ensure that private equity gains were taxed more heavily, was announced after persistent pressure from the unions, which account for around two-thirds of Labour’s funding.

In his PreBudget Report last month, Mr Darling also announced changes to the status of foreign “nondoms”, who in future will have to pay a £30,000 fee to avoid paying tax on income earned abroad.

The proposed changes for nondoms prompted fears of a City “brain drain”, as nondomiciled workers left for countries with more favourable systems.

Roddy McDougall, editor-in-chief of Cantos, said: “Our survey seems to suggest that the Conservatives are still the City’s favourite, despite Labour’s efforts to prove their own credentials.

“The City has also shown that it is unconvinced by the business credentials of the Liberal Democrats and, with more than half of our panel not knowing who to pick as the next party leader, it shows they have some serious work to do in the City if they are to make headway at the next election.”

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