London's position as a financial hub will be dealt a severe blow if the UK left the single market, the head of Germany’s central bank has warned.

Jens Weidmann, president of Deutsche Bundesbank, warned that the “hard Brexit” scenario, favoured by conservative eurosceptics behind the “Leave Means Leave” campaign, would mean that Britain would be stripped of the right to authorise banks and finance companies to operate across the remaining 27 European Union nations.

He added that it would also allow Frankfurt to take business away from London.

“Passporting rights are tied to the single market and would automatically cease to apply if Great Britain is no longer at least part of the European Economic Area (EEA),” he said in a meeting with a host of European media outlets including The Guardian.

A central benefit for overseas banks that have subsidiaries in the City of London is that these firms have access to the EU market through a “passport”. There have been warnings that this passport would be scrapped if the UK left the EU, giving foreign banks an incentive to move their European headquarters from London to mainland Europe.

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Theresa May has previously been criticised for repeating the slogan “Brexit means Brexit” but failing to set out details of what she wants to gain from negotiations from the EU, but the Prime Minister insists she will not offer a “running commentary” on her strategy.

The Bundesbank president said that retaining passporting rights, was “crucial” for the City of London, warning that without them companies could relocate elsewhere.

“Of course several businesses will reconsider the location of their headquarters. As a significant financial centre and the seat of important regulatory and supervisory bodies, Frankfurt is attractive and will welcome newcomers. But I don’t expect a mass exodus from London to Frankfurt,” he said.

Weidmann warned that it was far too early to judge the economic impact of UK’s vote to leave the EU.

“Britain hasn’t even applied to leave yet,” he said .

“To assume on the basis of the developments so far that there won’t be any negative consequences would be to draw false conclusions. Great Britain is very closely tied to the EU and Germany. If you reduce these relations to that of a third country, it will suppress economic growth in Britain,” he added.

6 ways Britain leaving the EU will affect you Show all 6 1 /6 6 ways Britain leaving the EU will affect you 6 ways Britain leaving the EU will affect you More expensive foreign holidays The first practical effect of a vote to Leave is that the pound will be worth less abroad, meaning foreign holidays will cost us more nito100 6 ways Britain leaving the EU will affect you No immediate change in immigration status The Prime Minister will have to address other immediate concerns. He is likely to reassure nationals of other EU countries living in the UK that their status is unchanged. That is what the Leave campaign has said, so, even after the Brexit negotiations are complete, those who are already in the UK would be allowed to stay Getty 6 ways Britain leaving the EU will affect you Higher inflation A lower pound means that imports would become more expensive. This is likely to mean the return of inflation – a phenomenon with which many of us are unfamiliar because prices have been stable for so long, rising at no more than about 2 per cent a year. The effect may probably not be particularly noticeable in the first few months. At first price rises would be confined to imported goods – food and clothes being the most obvious – but inflation has a tendency to spread and to gain its own momentum AFP/Getty Images 6 ways Britain leaving the EU will affect you Interest rates might rise The trouble with inflation is that the Bank of England has a legal obligation to keep it as close to 2 per cent a year as possible. If a fall in the pound threatens to push prices up faster than this, the Bank will raise interest rates. This acts against inflation in three ways. First, it makes the pound more attractive, because deposits in pounds will earn higher interest. Second, it reduces demand by putting up the cost of borrowing, and especially by taking larger mortgage payments out of the economy. Third, it makes it more expensive for businesses to borrow to expand output Getty 6 ways Britain leaving the EU will affect you Did somebody say recession? Mr Carney, the Treasury and a range of international economists have warned about this. Many Leave voters appear not to have believed them, or to think that they are exaggerating small, long-term effects. But there is no doubt that the Leave vote is a negative shock to the economy. This is because it changes expectations about the economy’s future performance. Even though Britain is not actually be leaving the EU for at least two years, companies and investors will start to move money out of Britain, or to scale back plans for expansion, because they are less confident about what would happen after 2018 AFP/Getty Images 6 ways Britain leaving the EU will affect you And we wouldn’t even get our money back All this will be happening while the Prime Minister, whoever he or she is, is negotiating the terms of our future access to the EU single market. In the meantime, our trade with the EU would be unaffected, except that companies elsewhere in the EU may be less interested in buying from us or selling to us, expecting tariff barriers to go up in two years’ time. Whoever the Chancellor is, he or she may feel the need to bring in a new Budget Getty Images

Banks are discussing whether they will need to move European headquarters to the continent to keep the same privileges, following June's referendum.