CORRECTED-Britain's bankers to put wallets first in 'nightmare' election

(In first paragraph corrects to May from next month)

* EU vote and anti-business rhetoric weighs on banks

* Contingency planning for 'Brexit' underway

* Dublin seen as possible venue for relocation

* Domestic banks fear Labour's market share cap

* Banks to become more vocal in 'Brexit' debate

By Matt Scuffham, Patrick Graham and Anjuli Davies

LONDON, March 19 (Reuters) - When it comes to politics,bankers tend to let their wallets guide their voting choices andMay's British national election will likely be no exception.

Faced with the prospect of a Labour government that wouldhike the top rate of income tax to 50 percent and extract a levyfrom their bonuses, most financiers are rooting for there-election of David Cameron's Conservatives, even though thatwould mean a potentially damaging referendum on Britain'smembership of the European Union (EU) before the end of 2017.

The mere threat of Britain leaving the EU could seriouslydamage London's standing as Europe's financial hub, but manybankers would prefer to deal with the uncertainty and campaignfor a "Yes" vote than see Labour's Ed Miliband voted primeminister on May 7.

"Miliband would be worse (than Cameron) by far. If theybring in the bonus tax there won't be any bankers left," saidone investment banker.

Elected to lead Labour with the backing of the unions,Miliband has reversed the pro-business mantra of Tony Blair,Labour's most successful leader, who along with his financeminister Gordon Brown embarked on an offensive to buildrelations with boardrooms in the 1990s.

With voters still aggrieved at how the banks have snappedback from the financial crisis with bumper pay packets intact,the Conservatives have also targeted the sector, with FinanceMinister George Osborne hiking an industry levy by one third inhis annual budget this week.

The British Bankers Association has warned Osborne's movecould drive members out of London, but in private, bankersaccept that the Conservatives, their usual party of choice, needto win votes and they remain a convenient cash-raising target.

Miliband's plans, which target their personal wealth and thestructure of the industry, are more contentious.

TRUMP CARD

To reassure the financial elite, Labour lawmakers privatelyplay their trump card that a vote for them is a vote forcertainty on Europe. But this is not gaining much traction inthe skyscrapers of Canary Wharf, the east London estate whichhosts institutions including Barclays and HSBC.

"Senior Labour figures, when you go to lunch with them, theyare actively getting that message out there," said an executiveat one international bank. "Frankly you see a lot of fairlystoney faced people sitting around the room."

None of the 23 senior bankers interviewed by Reuters forthis story wanted to be identified because of the sensitivity ofthe topic.

State-backed banks such as RBS and Lloyds have the most to lose if Miliband follows through on a promiseto limit the market share of any bank. Lloyds is the biggestplayer in personal current or checking accounts with a 25percent share, while RBS has the same share of small businessaccounts.

Wading into a UK election would be playing with fire for anybanker, local or international, so instead they are thinkingabout a vote they might be able to influence, a possiblereferendum on "Brexit".

Chastened by last year's vote on Scottish independence, whencomplacency in London helped the "Yes" camp nearly score ahistoric upset, financiers are preparing to come out early insupport of Britain staying in the EU should Cameron bere-elected.

Some U.S. banks have already gone public on the issue, withJP Morgan supporting Britain's membership of the EU in asubmission to Britain's finance ministry and Goldman Sachs President Gary Cohn telling the BBC that Britain beingpart of Europe was "the best thing for all of us".

VITAL ELEMENT

Despite its unpopularity among some voters, the financialservices industry remains vital to the British economy,employing more than 7 percent of the workforce, producing nearly12 percent of total economic output and contributing 66 billionpounds in taxes, according to lobby group TheCityUK.

Conscious of how unpopular they are with ordinary voters,bankers are not going to appear en masse on British televisionto lobby for Europe.

Instead, they will work with chambers of commerce,like-minded politicians and industry groups such as the BritishBankers Association, TheCityUK and the Association for FinancialMarkets in Europe to get their message across.

"Are we going to say more between now and an EU referendum?The answer is 'yes'," said the bank executive.

"If politicians tell us 'don't wait till the last minute',its important that you speak up. But there is a danger, as oneeurosceptic MP said to me last year, that the banks coming outin support of Europe could be the best thing the 'Out' campaigncould imagine."

International banks have already begun to look at movingoperations overseas to access EU markets if Britain votes toleave the union. Dublin is a possible location although somebankers doubt they could persuade enough staff to uproot theirfamilies and move to Ireland.

Other options include Frankfurt and Paris, but the morerestrictive labor laws in those countries are a hurdle.

"It's a complete nightmare," said one senior banker. "Ithink people are more nervous about this election that they'veever been." (Editing by Carmel Crimmins and David Holmes)