© Reuters. The Houses of Parliament are seen through a European Union flag as demonstrators arrive in Parliament Square during the anti-Brexit 'People's March for Europe', in central London

By Kate Holton

MANCHESTER, England (Reuters) - British companies including pharmaceuticals giant AstraZeneca (L: ) urged the government on Monday to agree a three-year Brexit transitional deal to ease the uncertainty hampering investment decisions and the economy.

Britain's biggest companies have become increasingly alarmed by the slow progress of Brexit negotiations and the prospect the country could crash out of the world's biggest trading bloc without a deal in 2019.

Prime Minister Theresa May vowed in a speech last month to seek a two-year transition deal to help reduce the disruption, but her efforts were overshadowed by a challenge from Foreign Secretary Boris Johnson who has set out his own terms for Britain leaving the European Union.

Johnson, a leading Brexit campaigner, said a transition period should not last a second more than two years. He also said Britain should not accept new EU or European Court of Justice rulings during transition, must not make payments for single market access when the transition ends, and should not agree to shadow EU regulations to gain access.

AstraZeneca Chairman Leif Johansson said the reality was that a company like his, with 60,000 employees around the world, needed at least three years to prepare for Brexit, and more guidance beyond that.

"It should be at least three years," he told the Swedish daily Dagens Nyheter. "And very early in that period, we need to know what to expect in years four, five and six."

Adam Marshall, the director general of the British Chambers of Commerce which represents companies employing 5 million people, also called for a three-year transition, and went further, saying the infighting at the heart of government had undermined confidence in the country.

"Businesspeople across Britain are growing impatient with division and disorganisation at the heart of the party of government," he said in a statement. "Public disagreements between cabinet ministers in recent weeks have only served to undermine business confidence."

Britain's shock 2016 vote to leave the EU stunned many businesses, with the prospect of border delays and tariffs threatening to fracture intricate supply chains that have built up across the continent over the last 40 years.

Supporters of leaving the EU admit there may be a short-term hit to the economy but say that ultimately Britain will prosper because Brexit will break the shackles that have clamped it to a decaying German-dominated experiment in European integration.

The world's fifth-biggest economy grew at its slowest pace since 2013 in the 12 months after the referendum and companies have warned they will struggle to invest until they have a clearer idea of how Britain will trade in the future.

While many businesses welcome a transitional period, they warn it does not help if they do not know what they are transitioning to.

Showing how little room the government has to maneuver, the trade body that represents Britain's powerful finance sector, CityUK, said any transition deal should be used to hammer out a deal that allows Britain to set its own future and not take rules from Brussels.

"We stress that we need a transitional period in order to reach a decent deal in the long term," it said. "We cannot be in a situation where the UK is a rule-taker, that is not appropriate either for this industry or for this country."

Finance minister Philip Hammond acknowledged the divisions within the cabinet and said uncertainty over Brexit was weighing on the economy. But he said he was working to remove the "cloud of uncertainty" and that he was fighting for a good deal.

"There are short-term challenges and the uncertainty created by the Brexit negotiation process is one of them," he told BBC radio from the Conservative Party's annual conference.

"The sooner we can get some clarity, the sooner we can move forward, give businesses and investors more certainty about the future, the quicker this economy will start growing again."