LONDON – Ian Robinson, co-owner of a small investment firm in London, is watching Britain's general election this Thursday with unease.
A victory for Prime Minister David Cameron's Conservative Party could bring Britain a step closer to leaving the 28-nation European Union, a move many companies fear would cause damage by increasing costs of doing business on the continent and eroding London's role as a global financial hub.
Robinson says leaving the EU would make even the most basic things more difficult for businesses in Britain, forcing him to apply for licenses in each country where he operates rather than getting a single permit from British regulators.
"Leaving the EU would be a disaster," he said in the offices of Kinson Capital Ltd., which manages assets and provides advisory services for banks and hedge funds. "Financial services and a lot of businesses work on an EU passport."
Cameron promised to hold a referendum on EU membership in 2017 as he sought to blunt the rise of the U.K. Independence Party, which says Britain should leave the bloc so it can stem the tide of immigrants from Europe and return all decision-making back to London from EU headquarters in Brussels. While the British campaign has focused mostly on issues like the economy and health care, uncertainty over Britain's possible exit — informally called "Brexit" — may curtail investment and rattle financial markets until the issue is resolved.
"Brexit is probably the biggest single source of uncertainty right now for U.K. investors," Daniel Vernazza, an economist at UniCredit Bank, said in an email. "The Conservatives have pledged an in-out referendum by the end of 2017, so it could be a multi-year period of uncertainty."
Only last month, HSBC, one of the world's biggest banks, said it was considering moving its headquarters out of the U.K., partly because of the EU debate.
Britain joined the EU in 1973, bringing the bloc to nine members. Today the EU is made up of 28 countries, and with more than 500 million people is the world's largest economic bloc.
Historically, Britons have mostly wanted to remain in the EU. A poll conducted by Ipsos MORI in October found that 56 percent of respondents said they'd vote to stay in a referendum, while 36 percent would vote to leave. About 1,000 adults were interviewed by phone Oct. 11-14. The margin of error was plus or minus 3 percentage points.
But while the U.K.'s EU membership comes with advantages — like unfettered access to a 13.9 trillion euro ($15.5 trillion) market — it also comes with conditions that many in Britain are now finding onerous.
Of particular concern is one of the EU's founding principles — that citizens of any EU country can live and work in any other member state. After the EU expanded into former communist countries of Eastern Europe in 2004, Britain saw a huge increase in migrants seeking work.
Opinion polls show that UKIP, once a fringe party, may receive more than 10 percent of the May 7 vote as a result of its focus on immigration and the EU. In an election in which Britain's traditional two-party system has broken down, those votes may cost Cameron his job.
Former Labour Prime Minister Tony Blair made a rare return foray into electoral politics recently to criticize Cameron for pandering to xenophobic voters.
"Think of the chaos produced by the possibility, never mind the reality, of Britain quitting Europe," Blair said in a speech this month. "Jobs that are secure suddenly insecure. Investment decisions postponed or cancelled. A pall of unpredictability hanging over the British economy. And for what? To satisfy the insistent Europhobia of a group who will never be satisfied."
Cameron says he wants Britain to remain in the EU, but only if the bloc is reformed. He wants to limit the free movement of labor so that migrants have the right to work outside their home countries but don't have an automatic right to claim benefits.
"What I'm doing is putting the country first and saying the people of the U.K. should be able to have a choice about whether they want to stay in Europe on a reformed basis or leave," he told the BBC. "It's an in-out referendum by the end of 2017. It's right for our country and it's right for Europe, too."
Cameron went so far as to describe a referendum as a "red line" issue and said he would not be a partner in a government with a party that did not accept that vote. That stance would sit poorly with the Liberal Democrats, which has partnered with the Conservatives in Cameron's own current government.
Proposals for reform have so far received little support from other European leaders, including German Chancellor Angela Merkel. European Commission President Jean-Claude Juncker said last week the EU would consider only minor changes.
While the EU is talking tough, it too, has a lot to lose should Britain leave, as London is Europe's pre-eminent financial center. Britain is also the EU's second-biggest economy after Germany and was the world's fastest-growing developed economy last year.
European business leaders are more concerned about Britain leaving the EU than they are about the much more widely discussed possibility of a Greek exit, according to a survey released Thursday by accounting firm Grant Thornton. Almost two-thirds of eurozone business leaders surveyed say Britain's departure would have a negative impact on Europe, compared with 45 percent for Greece.
"This aversion to a Brexit arguably gives the next British government a strong hand when it comes to seeking reform in Europe," said Sacha Romanovitch, CEO elect at Grant Thornton's U.K. arm. "One thing's for sure: businesses and policymakers across the continent will be watching very closely to see how the dust settles" after the election.
The election is so close, however, that even if Cameron wins, he may not get the majority needed to secure a referendum on the EU. UKIP's support has plateaued and Labour leader Ed Miliband has said he's in favor of the EU.
But until there's clarity on the issue — which could take weeks — businesses and investors will be on edge.
In London, Robinson says he doesn't object to the idea of a referendum, but is worried it could be used by politicians to make short-term gains on populist issues like immigration while overlooking the long-term damage of any British exit from the EU.
"If you open it up to referendum, the political parties will hijack it and just use it for something else," he said.