The EU is set to demand the right to raid financial services firms in Britain after Brexit and hand its regulators sweeping new powers.

The move is the latest that shows that Brussels is beginning to get nervous about the UK leaving the EU. Brussels appears to be determined to shackle the City of London with red tape after the UK leaves the bloc.

The three regulators, the European Supervisory Authorities (ESAs), are to be given extra resources, levied in large part from British-headquartered firms, under the plans to closely police enforcement and regulation of the City. Ordinarily, this would be fine, but here’s the catch; Brussels will bestow the new powers on the ESAs during the Brexit transition period, when Britain will be stripped of EU voting rights and be powerless to stop the changes.

The result will be that once the transition period is over, the European Commission will rule over the firms’ access to the Single Market and will have the power to withdraw access within just 30 days, should it deem Britain to have moved too far away from EU rules.

The ESA reforms are one of at least 37 EU laws that will be imposed on Britain during transition. Among them are the contentious changes to rules for “clearing houses”, the majority of which are in London. The EU is hoping this could lead to the biggest clearing houses being forced to establish EU headquarters.

The British capital is the bloc’s financial centre and currently processes approximately 75% of euro clearing transaction, worth a combined €1tn (£880bn) a day in an industry that employs thousands of people.

Brussels has justified these reforms because of the financial instability that Brexit could bring but questions are being asked about whether there is a more sinister motive at play; namely is the EU so terrified about the UK leaving that they are prepared to punish the UK’s most profitable industry.

Unsurprisingly the tying of British hands has not been received with enthusiasm by those in the UK, who are viewing this as yet another punishment from the EU. Foreign Secretary Boris Johnson warned it would be “intolerable and undemocratic” for EU laws to be imposed on Britain after Brexit and that Brussels’ continued influence would curb the country’s ability to exploit changes in the world economy.

Conservative MP Andrew Bridgen, has labelled the move as “outrageous” saying that “given London’s role as a source of global capital, this is very much a case of the EU cutting its nose off to spite its face.”

And the House of Commons’ EU Scrutiny Committee has warned that “the proposals are of major political and legal importance, substantially altering the European System of Financial Supervision as it was created seven years ago and expanding the powers of the Supervisory Authorities.”

The City of London is adamant that relations between the UK and the EU must remain close but has also stressed that London will be more resilient than the EU. Industry sources have said that “London would not fall” if it lost its access to the EU Market, and there was nowhere in the EU that could rival the capital’s financial infrastructure, such as trade depostories.

This thinly veiled swipe at the British financial system is unlikely to give the EU any more allies and seems to be just another sign that the trading bloc is becoming genuinely terrified about what happens with the UK leaves. The larger issue at play here is that if other countries see this bitter behaviour, will they be willing to remain in this hostile environment?