A veteran French politician and experienced Brussels insider who has repeatedly clashed with the City of London over financial services reforms is to lead talks on Britain’s exit from the EU.

The president of the European commission, Jean-Claude Juncker, said he had wanted an experienced politician for an “important and challenging job” as he announced the appointment of Michel Barnier, a former EU commissioner. Barnier would “help us develop a new partnership with the UK”, he said.

A member of France’s centre-right Les Républicains (formerly UMP) party, Barnier, a former French cabinet minister, will take up his post on 1 October. He said in a tweet he was “honoured to be entrusted” with such a demanding task. The appointment will be viewed with some apprehension in London.

Michel Barnier (@MichelBarnier) honoured to be entrusted UK negotiation by @JunckerEU and @EU_Commission. Rendez-vous for beginning of demanding task on 1 October.

As internal markets and services commissioner from 2010 to 2014, Barnier was in charge of the key financial services portfolio, leading the bloc’s attempts to contain the eurozone debt crisis and establish its new banking union.

He oversaw more than 40 different laws aimed at tightening banking and market regulations on activities such as short selling, clashing repeatedly with bankers and the British government over the EU’s planned cap on City bonuses.

Barnier threatened “a coordinated response” from Brussels against banks that sought to dodge the cap by paying top staff extra allowances after Britain, outvoted 26 to one in Brussels on the proposal, launched a legal challenge at the European court of justice in 2013.

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Nick Clegg, the former deputy prime minister and now Liberal Democrat Europe spokesman, said the appointment “will set alarm bells ringing in the City of London”, adding that he doubted Barnier would be eager to protect the City’s passporting rights to operate in the eurozone.

A Downing street spokesperson said: “We’ve said it’s important that both sides prepare for the negotiations. We look forward to working with representatives from the member states, the council and the commission to ensure an orderly departure of the UK from the EU.”

Officials have suggested that they expect the key negotiations to take place at the council level, meaning that they see the most important figures as the president, Donald Tusk, and the leaders of other European countries.

May has started her premiership with a concerted effort to reach out to her counterparts across the EU, with trips to Poland and Slovakia on Thursday, following visits to Germany, France and Italy, with migration expected to be a key area of discussion.

Sources said the trips represented ongoing engagement with other leaders, with a desire to show that she would reach out into eastern Europe as well, acknowledging the Slovaks’ informal presidency of the EU.

Jacques Lafitte of the Avisa investment advisory group said Barnier’s appointment sent a very clear message of intent to Britain. “After all these years that the City has demonised Michel Barnier, often unjustly, the commission could not have sent a firmer message to the English,” he told Agence France-Presse.

But Mark Boleat, the policy chairman at the City of London Corporation, said: “Michel Barnier will bring a wealth of European political experience to the table. Financial markets are inter-connected across Europe. It is important that they are stable but also that they have clarity as soon as possible on what happens next to ensure they continue to serve customers and businesses.”

Barnier is seen in London as likely to represent the interests of France and Germany rather than the peripheral nations, but he is popular in the centre-right European People’s party and ministers said he would make it easier for a deal to be pushed through the European parliament. He also knows the UK’s Brexit minister, David Davis, from his time as Europe minister in the late 1980s.

At a briefing in Westminster, one UK cabinet minister said Barnier’s appointment was a “clever move” by Juncker, giving the commission a direct line to the next French government and also gave him a heavy hitter to deploy in the negotiations.

Denis MacShane, a former Labour Europe minister, said Barnier had “enormous experience as a national government minister and knows better than anyone that EU negotiations are about national priorities”.

He added: “The UK press may try to demonise him or make him out to be unfriendly to Britain. It will be water off a duck’s back for Barnier. It makes perfect sense for Juncker to appoint a senior French politician; if he had named someone seen as an anglophile there would have been instant suspicions in many EU capitals that the commission was ready to roll over for London.”

Lobby group, TheCityUK, said: “Michel Barnier has a deep understanding of financial services – an industry that has to be an important component of a successful new relationship between the UK and the EU.

“The UK is the financial centre of Europe and we look forward to working with the Commission, the Council and the member states to achieve an agreement that delivers mutual benefits for the UK and the 27 member states.

The British Bankers Association, which represents the banking industry, refused to make any comment. Sources said this was a sign of the banking industry’s nervousness about the appointment.

Juncker said in a statement that Barnier, 65, who has also held the EU’s regional policy portfolio and was appointed Juncker’s defence and security special adviser in 2015, was a “skilled negotiator with rich experience in major policy areas relevant to the negotiations”.

Seen by British Eurosceptics as a classic Brussels insider and altogether too integrationist for their taste, Barnier has been minister forenvironment, European affairs, foreign affairs and agriculture minister in several French governments and co-organised, with Jean-Claude Killy, the 1992 Winter Olympics ‎in Albertville‎, France.

An unsuccessful rival to Juncker for the job of commission president in 2014, Barnier will have the new official title of chief negotiator in charge of leading the commission taskforce for the preparation and conduct of the negotiations with the United Kingdom.

Theresa May has said London will take the time it needs to prepare its position before launching formal exit negotiations and Britain is not now expected by trigger article 50 of the treaty of Rome, setting the clock ticking on a maximum two years of talks, before early next year.