A draft deal to reform Britain’s relationship with the European Union has fiercely divided the Square Mile, prompting cheers from big business groups and drawing sharp criticisms from sceptical economists and industry leaders.

European Council President Donald Tusk tabled a tentative agreement yesterday for a “new settlement” for the UK in the EU, and in a letter to the leaders of all 28 EU member states, Tusk said his proposals go “really far in addressing all the concerns raised” by Prime Minister David Cameron.

But Tusk added: “This has been a difficult process and there are still challenging negotiations ahead. Nothing is agreed until everything is agreed.”

The circulation of the draft kicks off another two weeks of high-stakes negotiations ahead of a meeting of EU leaders later this month. Cameron has said that he wants to secure a final deal at the meeting, paving the way to hold an in/out vote as soon as June.

TheCityUK and Confederation of British Industry (CBI) welcomed yesterday’s draft, calling it a “milestone” in the reform process, while the Institute of Directors said the proposals were “better than expected”.

Economists and industry leaders, however, slammed the deal, saying it fell short of earlier promises made by the Prime Minister and chancellor George Osborne.

“Britain’s business leaders and finance professionals will remain to be convinced that today’s draft deal is the right formula for a better future in Europe,” said ICAS chief executive Anton Colella.

Quidnet Capital Partners chief executive Richard Tice agreed, telling City A.M.: “There is no genuine reform in any of this. The Prime Minister talks about substantial changes, but this is a restatement of the existing system.”

Osborne wrote in City A.M. last September: “One of the greatest threats to the City’s competitiveness comes from misguided European legislation. A central demand in our renegotiation will be that Europe reins in costly and damaging regulation.”

But Jon Moynihan, former executive chairman of PA Consulting Group, said he saw little in the draft that would curb harmful regulations.  “Even the small set of concessions achieved will either be just ignored by the EU as such agreements have in the past,” Moynihan said. “They are sort of meaningless as far as business is concerned.”

Among the proposals included in the draft is a so-called safeguard mechanism protecting non-euro countries from being discriminated against by the Eurozone.

The draft calls on Eurozone countries to “respect the competences, rights and obligations of member states whose currency is not the euro” and allows the UK to call a summit of EU leaders if it is concerned about punishing Eurozone rules, including those related to financial services. But the draft stops short of allowing the UK and others to veto Eurozone legislation.

“It’s not a mechanism that has any actual impact,” Europe Economics executive director Andrew Lilico told City A.M., calling the measure “completely worthless”.