Britain faces paying billions more in borrowing costs as a result of the European Union's planned tax on financial transactions, aimed to discourage speculative trading and bolster public finances, even if it does not sign up to the controversial plan.

According to a London Economics study commissioned by the City of London Corporation, the repercussions of eleven Eurozone countries implementing the EU Financial Transactions Tax (FTT) could lead to a £4bn (€4.7bn /$6bn) rise in the cost of issuing UK debt,. The so-called 'Tobin Tax' could become law as early as next year. The study adds that the cost of firms raising capital will increase by 100 basis points or more in member states that do not subscribe to the tax because of reliance on debt capital markets.

"The financial transaction tax is an ill-conceived idea that risks significantly damaging economic prospects across Europe. Not only would it adversely affect the cost of sovereign debt but it would also make it more difficult for businesses across the continent to access funding," says Mark Boleat, chairman of the corporation's policy committee in the report, which links the extra yield investors would demand to buy UK government bonds with the extra costs they would incur to trade them.

Another negative by-product of the EU FTT, says the study, is the distortion it would have on competition and "greater negative impact on returns from corporate and sovereign debt from non-participating EU states."

In January this year, EU finance ministers paved the way for 11 eurozone countries to design a FTT, which will effect equities, bonds and derivatives trades.

It is expected that a stock or bond trade will receive a 0.1 percent tax rate, while a financial derivatives contract will receive a charge of 0.01 percent for every transaction.

The plan is similar in style to a so-called 'Tobin Tax', named after the economist James Tobin who originally conceived the idea in 1972 to apply to currency trading. Other adoptees to the proposal include Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece, Slovakia and Slovenia.

If successful, the new plans could be adopted by 1 January 2014.

However, it is still unclear how and this tax would be collected and to whom it would be allocated to, especially countries that are not participating in the FTT.

While Britain opposed the proposal, Sweden and other member states have also voiced opposition.

Last week a panel of UK politicians criticised the government for not doing enough to stop the tax.