Millions of companies which do not export to Europe should be exempted from the most burdensome Brussels regulations, according to a new report by a business group campaigning for reform of the European Union.
Single market regulations cost UK businesses an estimated £7.5 billion a year, but fewer than 5% of companies actually export goods or services to other EU states, found the report by Business for Britain.
The report proposed a "British option", under which the 95% of UK companies which do not need access to the single market would not be required to comply with its rules. Meanwhile, its authors propose that the UK remain in the EU but withdraw from "political" aspects of the single market, and use the money saved to open up a chain of trade missions to promote British exports around the rest of the world.
Business for Britain chief executive Matthew Elliott said that the "British option" would "at a stroke better position Britain in the global race" and could be extended to other EU nations if they chose to adopt it.
But Business Secretary Vince Cable said the Government should be supporting British companies to trade with other EU states, not "holding them back" by taking actions which would close the door of the single market to them.
The TUC branded the idea "impractical, unworkable and unjust", while the British Influence group - which campaigns for continued UK membership of a reformed EU - said it would be a "bureaucratic nightmare" and would scupper the single market.
The new report is based on a six-month consultation, including a survey of business leaders which found that 46% believe the costs of complying with EU single market regulation outweigh the benefits of being in the EU, against 37% who thought the benefits outweighed the costs. Larger businesses said that benefits outweighed costs by a margin of 47% to 39%, while smaller companies said costs were greater than benefits by 47% to 33%. Medium-sized companies were equally split 43%-43% on whether costs or benefits were larger.
The report cited Government figures suggesting that just 69,559 out of 4.54 million UK businesses - 1.53% of the total - exported to the EU in 2011.
Under the "British option", existing EU regulation would still form the core of business law in the UK, but the Government would publish a list of regulations which companies that do not export to the continent could choose to opt out of, said the report.
Mr Elliott said: " By excluding these firms and organisations that don't need access to the single market from the most burdensome aspects of EU regulation, the Government would, at a stroke, better position Britain in the global race.
"It is clear from our survey of the business community that they want a forward-looking relationship with the EU based on trade rather than politics. Business leaders want access to the single market for the 5% of firms that trade with the EU, but they also want to make Britain more competitive in the global race and to ensure that we are better able to trade with the high-growth areas of the world."
But Mr Cable said: "One in 10 jobs in the UK rely on trade with the EU. By being in the EU, British businesses also benefit from a common set of rules to do business and attract foreign investors.
"In December, my department launched an ambitious new strategy to help the small and medium sized businesses to grow. As part of this vision, we should be supporting all British businesses to take advantage of the single market, not holding them back by shutting the door on the biggest trading block in the world."
TUC general secretary Frances O'Grady warned: "This is just another attempt to take away people's rights to paid holiday leave, health and safety at work, fairness and equality. It would take away basic employment rights - as well as protections like food safety and consumer rights - from everyone except the chosen few in Britain's export industries.
"It would create a two-tier economy with reams of bureaucratic red tape. It's impractical, unworkable and unjust."
And the director of the British Influence Our Biggest Market campaign, Adam Nathan, said: "These proposals would amount to a bureaucratic nightmare. While there is always scope for reducing the regulatory burden for businesses, these proposals would scupper the single market, which is based on the principle that anything legitimately put on the market in one member state may be put on the market across the whole EU.
"This would be a disaster for our EU exports, which account for 14% of our GDP, and small businesses looking to expand through exporting into Europe would face the double burden of complying with both UK and EU regulations."
British Influence supporter Jonathan Williams, of Southampton-based industry body Marine South East, said: "This proposal can only be described as utterly naive. European customers and suppliers are integral to the UK's business base.
"In the UK's marine sector, there can be few companies whose products and services do not at some stage end up entering the single market. Even a sole trader selling consultancy to a UK client would be seriously affected if the client sells into Europe: loss of that EU business potentially means loss of that consultancy contract."