Britain's foreign secretary says the European Union must implement fundamental reform or British people would vote to leave the bloc in an upcoming referendum.

Philip Hammond told the BBC on Sunday that "the British people will not be fobbed off with a set of cosmetic alterations to the way the EU works" and that there must be "substantive legally-binding change" for Britons to vote to stay in the 28-nation bloc.

He was speaking before a major speech by Prime Minister David Cameron setting out Britain's arguments for EU reform.

Cameron, who has long wanted to renegotiate Britain's EU membership, will formally set out his demands in a closely-watched speech and letter on Tuesday.

Britain is set to have a referendum on the topic by the end of 2017.