* Government report say independence compromises business
* Scotland critical, says split based on tight union
By William James
LONDON, July 2 (Reuters) - Growth and jobs could be at riskif Scotland hinders access to its biggest export market byvoting to split from the rest of Britain in a referendum nextyear, British business secretary Vince Cable said on Tuesday.
Businesses operating in an independent Scotland would facereduced access to the British market, extra regulatory andadministrative costs and increased uncertainty, analysis by thegovernment due to be released on Tuesday will show.
Scotland's 5 million population will vote next September onwhether they want to keep a 306-year union intact. Scottishnationalists say independence will free it from decades ofeconomic mismanagement, while the London-based government iscampaigning to keep Scotland part of Britain.
"The union works for businesses on both sides of theborder," Cable said. "Breaking up Scotland's most lucrativemarket would destabilise enterprise and potentially put growthand jobs at risk."
Scottish exports to the rest of Britain were worth 45.5billion in 2011, excluding oil and gas. That is double the valueof exports to the rest of the world and four times that of thoseto the European Union, the report said.
Joining the European Union post-independence would notcompensate many businesses for the loss of unfettered access tothe British market, the analysis said, highlighting the possibleloss of access to infrastructure and services such as RoyalMail, which delivers to most of Britain for a flat fee.
The Scottish government criticised the report, sayingScotland was proposing to keep a single market for goods andservices with the rest of Britain, including a currency union.
"Independence would allow future Scottish Governments torequire proper connectivity for rural areas, boost businessgrowth and ensure a combined economic regulator that is bothcheaper and more efficient than Westminster's bureaucracy," aspokesman for Scotland's devolved government said.
The report also acknowledges that independence could damagethe prospects for the rest of Britain, costing British exporterstheir second largest market.
The Confederation of British Industry (CBI) said freemovement of goods, services, capital and people benefited bothsides of the Scottish border.
"Scottish independence risks hampering this - businessescould have to deal with different regulations and currencies,for example, which would inevitably have a negative economicimpact," said CBI Director-General John Cridland.
Recent polls show nearly 60 percent would vote againstindependence.
The British government has recently produced researchshowing Scotland would have a unsuitably large financial sectorpost-independence including much of the operations of Royal Bankof Scotland and parts of Lloyds Banking Group
It has also said that the Scottish government's proposal fora currency union would not work.
Lloyds (LLOY)