Mayfair hedge funds were today ramping up pressure on Europe over rule changes dubbed a “French plot against London”.

Some of Britain's biggest hedge fund managers have warned the Treasury that they will leave the country unless the draft rules drawn up in Europe are rewritten.

They are furious that the directive on alternative investment fund managers was modified at the last minute so the European Commission could set a limit on borrowing levels.

Plans are being drawn up by hedge funds and private equity groups to move to Switzerland or New York if changes are not made.

This would be a major blow to London, which has long been regarded as the hedge fund capital of Europe.

The rebels include Ian Wace of Marshall Wace, who said: “If this directive goes through as drafted, large chunks of the industry will be leaving Europe, whereas we have the opportunity today to have large chunks of the industry coming to Europe.”

Officials at the Financial Services Authority have said the “killer” rules limiting borrowing are “obviously ridiculous” and will have to be rewritten.