Business leaders warned David Cameron today that "political rhetoric" about the European Union was putting Britain's future as an open, outward-looking nation at risk.

Opening the CBI's annual conference in London, Sir Michael Rake, its president, said: "Amidst by-elections and with the general election just six months away, the political rhetoric is inevitably ratcheting up as the battle for hearts, minds and votes intensifies."

He said Mr Cameron should not seek a "special deal" for Britain ahead of the in/out referendum he has promised in 2017 but should focus on reforms to benefit the EU as a whole.

Sir Michael said Britain faced a stark choice of two futures. "One, in which we risk looking inward, shutting ourselves off from the world in the face of inevitable global change and where we reject the power of free and competitive markets to drive progress," he said.

"The other, in which we embrace the openness which has always been the foundation of Britain’s success – to trade, to people, to investment and to ideas from abroad, and of competitive markets at home.

"British business will always choose openness."

In his own speech to the conference, Mr Cameron hit back at his business critics and denied that his referendum pledge was causing uncertainty for business, pointing to high foreign investment in the UK. "The worst thing we can do as a country is to pretend this debate is not happening," he said. He said business wanted a reformed EU, like the Tories, while Labour and the Liberal Democrats would stay in "come what may."

Sir Michael criticised Conservative calls to curb immigration, saying that businesses needed migrants to combat skill shortages in the UK.

But the CBI president also warned that Ed Miliband's plans for an energy price freeze and to reform the big banks could also undermine the recovery.