George Osborne has taken the lead in pressing for a quick referendum on Scottish independence after business leaders warned of a threat to foreign investment, Downing Street has said.

The chancellor, who chairs a ministerial group on Scotland, briefed the cabinet on the government's plans at Monday's Olympic cabinet meeting.

The prime minister's spokesman said David Cameron and the chancellor had both received warnings about a threat to foreign direct investment in Scotland.

"It is clear that one thing business never likes is uncertainty – whether that is legal uncertainty, political uncertainty or economic uncertainty," the spokesman said. "Certainly the feedback [the prime minister] has had and the chancellor has had from business suggests this uncertainty around Scotland's place in the union is having an effect.

"This relates to private conversations the chancellor and the prime minister have had. The chancellor is on record as saying he has talked to some of the largest companies in the world and this is what they were saying to him."

Osborne briefed the cabinet on the prime minister's announcement on Sunday that a referendum on Scottish independence should be held within the next 18 months. Ministers are acting after legal advice that a referendum called by the Scottish parliament could be open to a challenge in the courts. Constitutional matters are "reserved" to Westminster in the 1998 Scotland Act. Ministers believe that only a bill introduced at Westminster could allow for a legally binding referendum. Michael Moore, the Scotland secretary, and Danny Alexander, the chief secretary to the Treasury, also briefed the cabinet.

Cameron's spokesman said: "[The prime minister] thinks that a referendum needs to be legal, fair and decisive. In the Scotland Act 1998 it is clear that the constitution is a reserved matter. A number of independent commentators and legal experts have highlighted the fact that a referendum bill passed by the Scottish parliament could be open to legal challenge. The prime minister is keen to ensure that any referendum should be legal, fair and decisive."

Alex Salmond, the SNP leader and Scottish first minister, had been hoping to follow a slower timetable and to delay a referendum until 2014. He had been planning to ask three questions – whether Scotland should have independence or remain in the UK or whether it should opt for "devo max" – a souped-up version of devolution that falls short of independence.

Johann Lamont, the leader of the Scottish Labour party, welcomed the idea of a quick referendum. "We want the referendum to be held as quickly as possible and we want it to be run in Scotland. If these proposals help there to be a quick, clear and decisive referendum result we would welcome them, but we have yet to see the details."

Lamont welcomed comments on Monday morning by Nicola Sturgeon, Scotland's deputy first minister, that the SNP favoured a simple in or out referendum. Sturgeon told BBC Radio Scotland: "The SNP have always said that is our preferred position, but there is a substantive body of opinion in Scotland that says we should have substantially more powers … short of independence."

Lamont said: "One thing we do welcome is Nicola Sturgeon's statement that the referendum should be one question. There is now consensus between all four main Scottish parties that the referendum should be one straight yes or no question on Scotland leaving the UK."