Ireland begins to fret over 'Brexit' as UK election nears

* Dublin committee meets twice weekly to consider impact

* Concern over economy, UK-Irish ties, Northern Ireland

* Bilateral trade would suffer if tariffs brought back

By Padraic Halpin

DUBLIN, March 6 (Reuters) - Concerned Irish politicians and businesses have begun planning for the possibility of Britain exiting the European Union, a step that could have large implications for the UK's small neighbour.

Britain's future in the EU could hang on the May 7 election as Prime Minister David Cameron has promised to renegotiate Britain's EU ties, then hold a referendum on membership, by the end of 2017 if his Conservative Party is re-elected.

Ireland (Other OTC: IRLD - news) is not the only EU member bristling at the idea of a "Brexit", but the costs would likely be most acutely felt in the former British colony whose export-led economy is the fastest growing in Europe as it recovers from a deep financial crisis.

"We cannot afford the potential deep uncertainty that would inevitably result from a fundamental change in the EU-UK relationship, let alone the concrete difficulties which could arise," Ireland's European Minister Dara Murphy told a parliamentary committee this week.

The Committee has been holding twice-weekly hearings since February on what a "Brexit" - shorthand for a British exit from the EU - would mean for Ireland. Members also travelled to London this week to meet with MPs and other groups.

Murphy laid out Dublin's concerns as being four-fold - the potential damage to the economy, to British-Irish relations, to peace in the British province of Northern Ireland and to Ireland's influence in the EU were it to lose a close ally.

Economic concerns have been to the fore. The United Kingdom is Ireland's biggest trading partner and Murphy said nearly 200,000 Irish jobs - representing 10 percent of Ireland's workforce - depend on that close economic relationship.

Over 40 percent of merchandise exports from Irish-owned firms goes to the UK, as does more than half of imports and exports of agri-food products. Analysts warn trading costs could become prohibitive if an EU-free Britain reintroduced tariffs.

"These are huge numbers. The concept of Britain leaving the EU is very worrying, it serves nobody's purpose," Smurfit Kappa (LSE: SKG.L - news) CEO Gary McGann told Reuters on the sidelines of a British Irish Chamber of Commerce conference on the subject.

Businesses have begun to weigh up the possible consequences. Bank of Ireland boss Richie Boucher said last week his bank had examined the issues around a referendum, concluding that its British business would not be much affected but there would be "potential upsides and downsides" for Ireland.

McGann, who campaigned for the ratification of the EU's Lisbon Treaty in a 2009 referendum in Ireland and whose packaging group employs 42,000 across 32 countries, said Irish business can help present continued British membership in the EU in a wider context.

"Because we box much way above our weight, Irish business has the capacity to take this away from 'Britain making demands on Europe'. There are a number of legitimate issues that we in business can align with," he said.

The government appears to agree.

"The stakes are so high that we need to take a proactive, determined and consistent public approach on this," Murphy said. (Editing by Tom Heneghan)