Britain must realize the "economic reality" of staying in the European Union (EU) and move away from "emotional" debates about membership, the head of a manufacturers' group told CNBC on Monday.
"A lot of non-EU businesses invest in the EU to get access to that EU market. So when you bring this down to some form of rational economic debate, I think it stacks up very clearly that we must stay in," Terry Scuoler, CEO of the manufacturers' lobby group EEF told CNBC.
The organization, formerly called the Engineering Employers' Federation, warned that 37 percent of manufacturers would have to make significant changes to their business plans if the UK left the 28-nation bloc, and one third would be less likely to invest in Britain.
Scuoler's comments come amid a wave of calls from members of the British business community for the country to stay within the EU as a fierce debate over the U.K.'s relationship with Brussels heats up.
(Read more: UK 'Brixit' – have the chances increased?)
The current Conservative collation government is pledging to hold a referendum on the U.K. remaining a member of the EU in 2017 following increasing pressure from members of his own Conservative party, and the Eurosceptic U.K. Independence Party.
Carmaker Nissan urged the U.K. to remain in the EU as an exit could create obstacles to foreign investment. Japanese technology group Hitachi said a British withdrawal would throw its large-scale nuclear and transport investments in the country into doubt.
Findings from an EEF survey showed that almost 90 per cent of the group's members sell directly or indirectly to customers in the EU. Three in five said the EU is key to their export strategy.
"Britain must not gamble on its future in Europe. The stakes are enormous. It is naïve to think we can simply pull up the drawbridge and carry on as normal," Scuoler said in a press release.
(Read more: Could Brixit be next problem for EU?)
Scuoler admits that Britain should look at its relationship with the EU but ultimately stay in the union.
"Yes, there are issues of how the EU carries out its business, reform is perhaps something that we need to do, but let us stay in," he said.
Some business groups have criticized the amount of red tape holding back companies.
A total of 3,580 regulations and directives have been passed by the EU that affect British businesses, according to a survey released by lobby group Business for Britain on Monday. A businessperson would spend 92 days to read all the laws, the survey adds.
(Read more: How Brixit could affect U.K. economy)
"The EU has an addiction to red-tape that desperately needs to be tackled. No-one would argue that a single market needs some regulation to function properly, but the volume and frequency of new directives being generated is a serious restraint to British businesses," Matthew Elliott, Chief Executive of Business for Britain, said in a statement.
The British Chamber of Commerce (BCC) waded into the debate on Monday saying that 77 percent of the 4,000 members they polled were in favor of a referendum on the EU-Britain relationship.
"Those calling for the Prime Minister to abandon his efforts to reform and change the UK's relationship with the European Union fail to recognise that the status quo is not an option. The EU is changing, and UK politicians must defend our national interests as the future of Europe is decided - not simply accept a blueprint dictated by others," John Longworth, Director General of the BCC said.
—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal