May 20, 2014 / 11:22 PM / 6 years ago

UK business lobby says EU referendum would put investment at risk

LONDON (Reuters) - Firms may halt some investment in Britain due to the risk that the country could hold a referendum on leaving the European Union and that Scots may vote for independence, the country’s top business lobby warned on Wednesday.

The EU and the Union flags fly outside The European Commission Representation in the United Kingdom in central London January 23, 2013. REUTERS/Stefan Wermuth

Speaking the day before Britons vote at European Parliament elections that could see the anti-EU United Kingdom Independence Party top the polls, the Confederation of British Industry said even the idea of a referendum was harmful.

“We accept that calling a referendum on EU membership is a constitutional issue for government, but even the possibility of it happening has caused uncertainty for business, with the risk of fewer inward investments than would otherwise have been made,” said CBI President Mike Rake.

Rake will deliver his comments at a dinner on Wednesday, where Conservative finance minister George Osborne is also due to speak.

The Conservatives - concerned at losing support to UKIP - have promised a referendum on leaving the EU if they win a national election in May next year.

Scotland’s referendum in September on independence from the United Kingdom added to concerns about Britain’s geopolitical future, the CBI said, restating its belief that the economic case for independence had not been made.

“It is difficult to see how independence would be better for investment and for jobs,” Rake said. He added that the pro-independence Scottish National Party’s plan for Scotland to keep sterling after independence “would lack many of the conditions for a stable currency to function”.

Taken together, the Scottish referendum, EU uncertainty and a national election scheduled for May of next year were causing businesses to think twice about investment, even as the economy improved, the CBI said.

“The uncertainty they engender is climbing up businesses’ risk registers, becoming a factor in investment decisions,” Rake said.

British business lobbies are divided on the merits of holding a referendum on Europe. The Institute of Directors said on Monday their survey had found a majority of British firms would vote to turn their back on the EU unless Britain can reform its relationship with the bloc.

Reporting by David Milliken Editing by Jeremy Gaunt

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