London will remain competitive - LSE chief

London - Britain leaving the European Union (EU) would not harm London's ability to compete as a global financial centre, but could threaten the bloc's ability to attract investors, the chief executive of the London Stock Exchange said on Tuesday.

Tension between Britain and its EU partners has been growing in recent years, after clashes with larger regional peers like France and Germany over financial regulation issues such as bank capital requirements and a proposed financial transaction tax.

Britain's declining say in EU matters and loss of regulatory sovereignty has led Prime Minister David Cameron to pledge to hold an in/out referendum by the end of 2017.

Lobby groups and a growing number of banks, including Goldman Sachs, Citi and JPMorgan, have all argued against a so-called "Brexit", saying it would hurt London's position, but LSE CEO Xavier Rolet, says the EU stands to lose more than the UK capital would.

"I doubt very much that Europe without the UK... would be able to attract a competitive set of investors," he said during the Reuters China Summit.

Rolet, who has led the London bourse since 2009, said Britain has taken steps to encourage more investment and stimulate its economy, such as supporting small- and medium-sized enterprises (SMEs) - a move that has helped create 1.8 million jobs in its private sector in the last three years.

He said the rest of the EU, including his native France where there are 2.2 million SMEs compared to the UK's 4.8 million despite being a similar size, should follow suit and make adjustments to economic and financial policies that would appeal to foreign investors, like the Chinese.

"If you put yourself in the shoes of a Chinese decision-maker, they are going to make a bet on a financial standard that ultimately is competitive. London is a litmus test of competition," he added.

"It's really important for the European Union to send a message that countries that consider and regard competitiveness as important can have a future inside the European Union and... don't have to leave in order to maintain that competitiveness."