Prepare for UK exit from EU, Asian bank warns

The paper, written by Alastair Newton, a one-time British diplomat and advisor to former prime minister Tony Blair, added that "the British government's response to the crisis of encouraging eurozone integration while looking for a looser UK relationship with the EU appears to be fanning the Eurosceptic flames."

The British Conservative party remains in a coalition with the pro-European Liberal Democrat party, but their agreement has been shaken following a public row over Liberal Democrat plans to reform the House of Lords, Britain's upper chamber of parliament.

Referring to this, the Nomura paper noted that "further concessions to the eurosceptics could split the ruling coalition, already subject to significant internal strains, and precipitate an early election to be followed, irrespective of the outcome, by a referendum."

The eurozone debt crisis has led to increasing euroscepticism among back-bench Conservative MPs, who are urging Prime Minister David Cameron to use potential changes on further integration to the EU Treaty to re-negotiate Britain's terms of membership.

Elsewhere, a sizeable minority of Tory MPs want an immediate "in/out" referendum.

A recent survey of party activists by the influential conservativehome.com website found that six in 10 Tory supporters favoured a coalition deal with the UK Independence party, which campaigns for Britain to leave the EU.

A so-called "Fresh Start" group of Conservative MPs, who were first elected in 2010, also released a report in June identifying priority policy areas to be repatriated.

Policies at the top of the eurosceptic shopping-list include exemptions from financial sector regulation and the restoration of the British opt-out from EU social policy, including directives on temporary agency workers and limitations on working time.

Meanwhile, an opinion poll for YouGov taken last month indicated that only 15 percetnt of Britons would vote to remain in the EU as it is, while 50 percent would vote to leave the EU if other countries refused to re-negotiate Britain's terms of membership.

Claiming that "it is only a matter of time, in our view, before crisis-related steps are agreed which necessitate treaty changes," the Nomura paper added that "the British government will almost certainly demand 'treaty change for treaty change' in an effort to repatriate powers."

Other European leaders have been reluctant to accede to British demands.

After failing to win support for exemptions for London's financial services sector from EU regulation at an EU crisis summit in December 2011, Cameron vetoed attempts to adopt the fiscal compact within the EU treaties.

In July, the UK government announced plans to conduct a detailed audit of the cost of EU legislation, with conclusions to be published in 2014, in a move widely seen as an attempt to defuse the issue.

Launching the plans, foreign secretary William Hague said Britain would remain in the Union, telling the House of Commons that "the government are committed to playing a leading role in the EU."