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By Kate Holton
LONDON, Jan 23 (Reuters) - Leading British business figureswarned Prime Minister David Cameron on Wednesday that his planfor an in-out referendum on the European Union membership was arisky gamble that could damage the economy and throttle foreigninvestment.
Speaking after Cameron's call for a vote by 2017, businessleaders in London and at the World Economic Forum in Davos said Britain's $2.5 trillion economy would face uncertainty now thatits future position in the 27 country-bloc was in question.
"Having a referendum sometime between 2015 and 2018 createsmore uncertainty and we don't need that," Martin Sorrell, thechief executive of the world's largest advertising group WPP, said in Davos.
"If I'm looking at it from the point of WPP, it is not goodnews," he said, of the group that employs 162,000 people across110 countries. "This is a political decision. This is not aneconomic decision. You added another reason why people willpostpone investment decisions."
Investors and CEO's worry that Cameron could fail to securea new settlement with the European Union, and that whether hedoes or not, he is tied to a referendum that could see votersdemand an EU exit that would wreak havoc on trade ties.
"It's an extremely high risk strategy," said Phillip Souta,director of Business for New Europe (BNE), a group formed bycompanies to make the case for Britain to staying in the EU.
"If you have a full in-out referendum in 2017 then it isimpossible to ignore the uncertainty.
"You can't have your cake and eat it. You can't have thisfull in-out referendum without risking potentially quite severedamage to the British economy and people losing their jobs ifinvestment decisions aren't made in our favour."
In an attempt to counter rising anti-European sentiment inBritain, leading business figures from Sorrell to Virgin Group'sRichard Branson have started to speak out about theramifications of Britain slipping out of the EU.
"I am deeply disturbed," Peter Sutherland, a former chairmanof BP, WTO director general and European Commissioner forIreland, told Reuters. "It's an appalling speech in my view."
"Seeking a new settlement for Britain is bound to create agreat deal of uncertainty, which is not good for business. Itwill take years to negotiate, if there is one at all."
'BREXIT LIMBO'
Some business groups such as the Confederation of BritishIndustry, which speaks for some 240,000 businesses, and theBritish Chambers of Commerce, which represents firms that employover five million people, said the threat of withdrawal wouldgive Cameron a strong hand in talks.
But they accept that the five year wait would increaseuncertainty and undermine investment in a Britain whose economyis stagnating.
"Announcing plans for a referendum on British membershipputs the onus on the rest of Europe to take the Prime Ministerseriously," BCC Director General John Longworth said.
"However, the lengthy timescale for negotiation andreferendum must be shortened. Although EU membership is not thebiggest issue facing businesses in a world filled withuncertainty, the prime minister must be mindful of the need forpace and ambition."
Cameron says he is confidant he can persuade the other 26 EUcountries to allow Britain to renegotiate its membership terms,and that as long as he gets the reforms he wants he willcampaign for Britain to stay in the bloc. After his speech, hetwice avoided a direct answer when asked if he would campaignfor Britain to exit the EU should he fail to secure the reforms.
"The policy is confused because he wants to present it asin/out, wants to campaign for staying in, and then says he wantsto change the way the EU is run," Marc Ostwald, a fixed incomestrategist at Monument Securities said.
"But the UK is just one of 27 members. The question oneveryone's lips is you may want that, but how do you get it?"
Many of the executives who have spoken on Europe say they want to see the bloc reformed, but believe it is better to do sofrom within the group than risk finding Britain on the outside.
Dropping out of the European Union could endanger the Cityof London, Europe's most important financial centre.
"The single market is the EU's greatest asset and is ofcrucial importance to the banking and financial servicesindustry in the UK," said BBA Chief Executive Anthony Browne,the head of the trade association for the UK banking andfinancial services sector.
"We are clear that we want the UK to remain an activeparticipant in the single market, helping to write the rules andpush for greater trade and economic growth."
