Britain must be ready to 'walk away' from EU, says Boris Johnson

The Mayor of London said that he has "always been narrowly in favour" of Britain staying in the EU and "particularly of protecting British interests in the single market", but said there was also a "real opportunity to get a better deal from Europe".

He backed David Cameron's efforts to renegotiate Britain's relationship with Europe.

However, he added: "It follows from our desire to have a renegotiation that we must also be prepared to say, OK, fair enough, we can't get the terms that are suitable, then we will walk away."

Referring to a call by Lord Lawson, the former Chancellor, for the UK to leave the European Union, he said: "Big beasts, large and small, lean, big whatever their dimensions, should recognise that only David Cameron is offering both a referendum and a renegotiation."

The Mayor, speaking on the sidelines at the third annual Global Investment Conference in London, dismissed some claims that Britain would suffer outside the EU.

"This is not for Britain the existential problem it was 20 years ago or when we joined at the height of the Cold War when the European Union was one of those institutions that guaranteed stability in the world," he said.

"The world has moved on. We now live in the globalised economy where the real growth markets are to be found outside Europe."

Earlier at the conference, David Cameron had dismissed eurosceptic fears, warning in a speech that it would be wrong for Britain to "simply leave" the union.

He said the debate about the future of the EU was happening all across Europe, not just in the UK because of the "stratospheric unemployment rates", arguing that the single currency was driving change to democracies.

Europe is "not competitive enough, open enough or flexible enough", Mr Cameron said, adding Europe "must be flexible enough to accommodate" countries that are members of the single currency and those that are not.

He vowed to "stand up and defend" the UK's financial services industry, particularly against damaging legislation from Brussels. The City is a "massive advantage" to the UK, he said, and warned that "we shouldn't spend our time in politics bashing banks."

He said that European leaders shouldn't be "surprised" that the UK has opposed efforts to cap bonuses and introduce a financial transaction tax since London hosts 40pc of the EU's financial services sector.

The Prime Minister said Britain faced a "sink or swim moment" in a global economic race and must drive economic reforms, including a new relationship with Europe, to stay on top.

He said the Government is driving through tax reductions, welfare reforms, infrastructure investment and trade deals to ensure the UK stays competitive globally.

Mr Johnson also called for the Government to "sort out" the UK's immigration system.

He told delegates: "I don't believe that we will be helping our young people if we close the London markets to talented foreigners. Frankly we must sort out our visa system which is still holding back our economy."

The Mayor said the Government must continue to focus on education, tax competitiveness, and warned it "must not continually bash sectors in which we are historically strong, not least baking and financial services that contributed £73bn in taxes to the rest of the UK economy."