The costs and benefits of membership to the European Union are "finely balanced" according to a new report.

Examining Britain's membership of the EU, the Institute of Economic Affairs examines the costs of Common Agricultural Policy and EU legislation as well as benefits such as tariff-free access to markets in Europe and potentially increased direct investment in the UK.

The report argues that any decisions concerning Britain's future in Europe should be taken on a purely political basis, with little consideration of the economic consequences of any move.

The authors of the report, Dr Brian Hindley and Martin Howe, do not advocate withdrawal from the EU, but stress the need to know Britain's economic position with and without the Union, should it develop "along lines which the UK finds unacceptable on fundamental political grounds".

The report states says that "fear of adverse economic consequences should not deter a British government from seeking to change the relationship of the UK with the EU, or, in the last resort, from leaving the Union".

However, a spokesman for the Britain in Europe campaign told ePolitix.com: "Britain benefits enormously from membership of the European Union. The European Union takes more than half of our trade and up to 3.5 million jobs depend on that trade. Leaving the EU would be disastrous for Britain".

campaigners against Britain's membership of the European single currency also said it was too early to consider Britain's exit from the EU.

Dominic Cummings, co-director of the No campaign, told ePolitix.com: "The EU has severe economic and institutional problems, particularly mass unemployment and bankrupt state pensions systems, but we believe the best policy for the foreseeable future is to stay in the EU and keep the pound".