The deepening crisis in the eurozone could see Britain quit the European Union for good, according to one of the world’s leading investment banks.
Japanese giant Nomura said the UK government could be forced to set a date for an in-out referendum as soon as the autumn as the single currency bloc lurches closer to disaster.
In a report for clients around the world, the bank said the European issue ‘could split the ruling coalition’ and cause alarm on the financial markets.
t was the first time a global bank has issued such a hard-hitting report on Britain’s deteriorating relationship with crisis-torn Europe.
Pressure is mounting on David Cameron to call a referendum with more than half of Conservative backbench MPs in favour of a public vote.
Former Prime Minister Tony Blair yesterday told a German newspaper that a British exit from the EU could be sparked by too much power being transferred to Brussels.
‘I am deeply worried that Britain could decide by referendum to leave the whole process,’ said Mr Blair.
But many analysts and businesses believe Britain would benefit from leaving the EU and forging new partnerships with emerging economies around the world such as Asia, the Americas and Africa. Others favour a looser relationship with Brussels.
‘A referendum on the UK’s membership of the EU seems to be becoming a more realistic prospect,’ said Vicky Redwood, chief UK economist at consultancy Capital Economics.
‘We think that concerns about the economic disruption if the UK were to leave are overdone. In fact, the economy could end up better off.’
The Nomura report – part of its ‘Issues which keep me awake at night’ series – dubbed a British exit from the EU ‘Brixit’.
It was written by London-based analyst Alastair Newton, an-ex British diplomat and former head of Mr Blair’s G7 team.
The report said: ‘The eurozone crisis has fuelled eurosceptic sentiment in the UK. The British government’s response to the crisis of encouraging closer eurozone integration while looking for a looser UK relationship with the EU appears to be fanning eurosceptic flames.
‘The next few weeks could be critical in the evolution of the eurozone crisis. Consequent developments in Europe could result in further pressure on the British government to commit firmly to a referendum on EU membership.’
Mr Newton said the impact of an exit from the EU or a looser relationship with Brussels on the economy and the City of London ‘is not clear at this time’.
But he added: ‘The increasing possibility of either a looser UK relationship with the EU or a UK exit is bound to raise both economic and political concerns including in financial markets.’
A poll of 2,000 businesses by the British Chambers of Commerce recently found that most firms – some 85 per cent – do not want further EU integration.
The survey found that only 12 per cent wanted to leave the EU altogether.
But almost half – 47 per cent – want to negotiate a looser relationship and only 9 per cent of want further integration.