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Business leaders warn Cameron: Hold early EU vote or risk 'accidental Brexit'

By David Milliken and Kylie MacLellan

LONDON/MANCHESTER, England (Reuters) - Prime Minister David Cameron must hold a planned referendum on Britain's European Union membership as soon as possible or risk "accidental Brexit", the head of the Institute for Directors, a business lobby group, said on Tuesday.

Cameron has promised to renegotiate Britain's EU ties and then hold a referendum on whether to remain a member by the end of 2017. He has said he will hold it earlier if he can, but Foreign Secretary Philip Hammond has warned the schedule is tight for a 2016 referendum.

Several polls have shown the gap between Britons who want to remain in the EU and those who want to leave remains narrow although one published on Tuesday put the 'remain' camp firmly in the lead.

"Britain voting to leave the European Union is at least a 50-50 possibility," IoD Director General Simon Walker told an audience of 2,000 business leaders in London on Tuesday.

"My concern is the timing of the referendum. I hope this government will not drag out the referendum process any longer than necessary."

Walker said businesses could suspend investment plans ahead of the vote and holding the referendum in the middle of the government's five-year term of office risked coinciding with a traditional peak in anti-government feeling.

"While our members believe some uncertainty is a price worth paying to resolve EU membership, delay puts a brake on decision-making, investment and the vigour of their businesses," he said.

Nigel Lawson, a Chancellor under former Conservative prime minister Margaret Thatcher and now leader of an anti-EU campaign group, told the conference that he expected the referendum would be "a very close run thing".

David Miliband, foreign minister under Britain's last Labour government, said the referendum was a "risky and perilous venture" and that it was wrong to think Britain could prosper outside the EU as a "Singapore of the North Atlantic".

MID-TERM BLUES RISK

A 2017 referendum would see Britain's renegotiation efforts caught up among French and German elections that year, the IoD's Walker said. Domestically, it risked becoming a vote on the government's planned spending cuts.

"The third year of an election cycle is a difficult time for any administration. There is a real possibility that a 2017 referendum would be a short-term judgement on the government: a chance to whack the political elite," he said.

"If ... the public votes to leave Europe, our members will have to accept it, and the period of uncertainty for business that will follow. They will be less philosophical if carelessness and domestic discontent led to an 'accidental Brexit'."

An opinion poll published on Tuesday showed many more people in Britain support staying in the EU than those who want to leave the bloc.

Fifty-five percent of respondents in the poll -- carried out by polling firm ComRes for the Daily Mail newspaper -- said they would vote to remain in the EU if a referendum was held now.

Thirty-six percent said they would vote to leave while eight percent were undecided, a smaller share than in previous polls.

The poll also showed the aspect of EU renegotiation that is most important to Britons is restricting the benefits that EU migrants entering the UK can receive, ComRes said.

(Reporting by David Milliken and Kylie MacLellan; editing by William Schomberg and Ralph Boulton)