By William James and Shadi Bushra

LONDON (Reuters) - Britain must remain part of the European Union, British business leaders said on Monday, but they called on Prime Minister David Cameron to oppose the "creeping extension of EU authority".

The comments from the Confederation of British Industry (CBI) appear to endorse Cameron's position. The prime minister says he wants to stay in the bloc but has pledged to renegotiate Britain's EU membership terms and put the changes to voters in an "in or out" referendum in 2017, if he is re-elected.

Divided public opinion over Europe poses one of the biggest obstacles to Cameron winning a second term in 2015. He is under pressure from Eurosceptic lawmakers in his ruling Conservatives to stem the loss of support to the UK Independence Party (UKIP), which calls for an immediate withdrawal from the EU.

A report by the CBI, which speaks for about 240,000 businesses, laid out its position on Britain's role in the European Union.

"British business is unequivocal; the single market is fundamental to our future," said CBI Director-General John Cridland, adding that the bloc gives Britain access to a 500 million-person market and helps it win foreign investment.

"But the EU isn't perfect and there is growing unease about the creeping extension of EU authority. Europe has to become more open, competitive and outward looking," he said.

Cameron has yet to specify which areas he want to focus on for reform.

"MISSION CREEP"

The macroeconomic think-tank NIESR said on Monday that there was a lack of adequate analysis to help inform voters on the economic consequences of Britain pulling out of the EU.

NIESR's director Jonathan Portes said producing such work would be a formidably difficult task, but highlighted the risk that Britain's large financial services sector - which accounts for nearly 80 percent of the economy - would suffer, and that external investment could be "seriously damaged".

The CBI said Europe needed a moratorium on new legislation in specific fields such as employment law, and to cut back on "lifestyle rules" governing areas like diet and gambling where it accused the European Commission of "mission creep".

It said the EU needed to tie up trade agreements with large markets such as the United States and Japan, estimating they could provide access to new markets worth $23 trillion. It also urged more focus on trade with emerging markets.

The single European market must also be opened up further, the CBI said. The report singled out the services sector for improvement, saying country-by country differences in the way professions were regulated was preventing many from working across borders.