By Sudip Kar-Gupta and Fiona Shaikh
LONDON (Reuters) - Britain should stay at the heart of Europe, industry executives said on Monday, with some of them warning that Prime Minister David Cameron's decision to opt out of a common European Union fiscal policy may make life more difficult.
Martin Sorrell, chief executive of the world's largest advertising group WPP told Reuters that Cameron's decision to veto a 27-nation deal, potentially isolating it within the bloc, "doesn't seem to be the best way".
"Intuitively, it seems to me that it would be better to be on the inside of the tent than the outside," Sorrell said on the sidelines of a conference in London. "It seems to be more about politics than economics."
Critics of Cameron's stance say this will make it more difficult for Britain to influence policy making within the European Union and risks alienating those partners who have traditionally been sympathetic to Britain's pro-market, anti-federal stance.
"The immediate challenge for us will be exerting influence over EU regulations that will affect the UK financial services industry and its customers," the Association of British Insurers (ABI), which represents funds managing 1.7 trillion pounds ($2.7 trillion) of assets, said in a statement.
There are also implications for specific policies where Britain had worked hard to build a support base.
Germany, Poland, Austria, Hungary, Malta and Cyprus, for example, had voted with Britain to opt out of the Working Time Directive governing working hours within the EU.
"There are practical implications, like voting in the EU Parliament and EU Commission on blocking issues like the Working Time Directive, which would have serious implications for business here," a spokesman for the Engineering Employers' Federation (EEF) told Reuters. "But it's too early to tell what the impact on those blocking minorities will be, or whether we will be damaged by suggestions we will be isolated."
The EEF echoed the view of Confederation of British Industry Director General John Cridland that the top priority for all parties on either side of the English Channel had to be drawing a line under the euro zone's sovereign debt crisis.
"The bazooka to stop eurozone and other economies going into meltdown was conspicuously absent. This is by far the most damaging outcome for companies," Cridland wrote in The Sun newspaper on Monday. "Business wants to see the coalition (government) concentrating on maintaining and increasing the UK's influence wherever it matters most."
The government noted in its Autumn budget statement last month that around half Britain's trade, worth around 450 billion pounds ($703 billion) in 2010, is with the other EU countries. The Treasury reckons that trade helps around 300,000 businesses and, directly or indirectly, accounts for 3.5 million jobs.
Britain's decision to go it alone rather than sign up to tighter fiscal rules and closer EU scrutiny of national budgets, has cheered the eurosceptic wing of Cameron's Conservative Party, some of whom want Britain to leave the EU altogether.
Opponents of continued EU membership are likely to face tough resistance, however, both from Cameron's Liberal Democrat coalition partners -- crucial to his parliamentary majority -- and big business.
Graham Chisnall, deputy chief executive of Britain's ADS defense industry association, noted that partnerships with European arms companies went a long way towards supporting the industry's 360,000 jobs in the UK.
"ADS' main focus is to safeguard the benefits to UK manufacturing industry of our membership of the European Union single market," Chisnall told Reuters.
Ian Rodgers, director of trade body UK Steel, was quoted by The Guardian newspaper as saying that he didn't expect any short term damage but that longer term Britain would become less relevant in political decision-making within the EU.
Even longstanding eurosceptics among Britain's business community conceded Britain could not completely isolate itself from Europe.
"I'm in favor of being in the old fashioned common market," said Tim Martin, chairman and founder of pubs group Wetherspoon and a vociferous critic of the single currency. "I worked in France for six months when I was 18 and I was able to do so because of the common market."
However, Martin said he believed Cameron's veto had helped avoid Britain "throwing good money after bad."
"I think we have to face up to reality and so does everyone else. The euro was a romantic and foolish concept and should never have been created. It might be painful to bury it but that's what we should do," Martin said. ($1 = 0.6402 British pounds)
(Additonal reporting by Matt Scuffham, Rhys Jones, Kate Holton, Douwe Miedema and Lorraine Turner; Writing by Paul Hoskins. Editing by Jane Merriman)