The chief executive of Rolls-Royce has told the company's British staff that business could be harmed if the U.K. leaves the European Union.

Torsten Muller-Otvos says the EU's free trade arrangements help the firm, which is owned by Germany's BMW Group. In a letter to staff at Rolls-Royce and Mini — which is also BMW-owned — he says that "tariff barriers would mean higher costs and higher prices."

Meanwhile, Britain's Society of Motor Manufacturers and Traders said Thursday that 77 percent of its members backed remaining in the 28-nation bloc. Britain will hold a referendum on EU membership June 23.

While many large British businesses support staying in, some 200 small-business leaders have signed a letter backing an EU exit. They say leaving would give firms more "flexibility and adaptability."