Prime Minister David Cameron said Scotland should hold an independence referendum as early as next year, clashing with the Scottish National Party (SNP) which wants more time to rally support for a break from the United Kingdom.

Cameron, who opposes Scottish independence, said uncertainty about the 300-year-old union between England and its smaller northern neighbour was creating problems for business and harming investment.

If (SNP leader) Alex Salmond wants a referendum on independence, why do we wait until 2014? Cameron told Sky News.

This is very damaging for Scotland because all the time business is asking: 'is Scotland going to be part of the United Kingdom? Are they going to stay together? Should I invest?'

Scotland, which kept its own legal system after the 1707 union, has had a devolved government since 1999, with control over health, education and prisons in the nation of five million.

The SNP won an overall majority in Scottish elections last May and has promised to hold a referendum in the second half of a parliamentary term lasting until 2016.

The party is hoping to exploit two events in 2014, the Commonwealth Games in Glasgow and the 700th anniversary of the Battle of Bannockburn when the Scots vanquished an English army, to create momentum for a breakaway.

The British government is expected to announce in the next few days whether any Scottish vote for independence would be legally binding. Newspapers reported on Monday that it could say

a vote had to be held in the next 18 months for it to have that legal force.

CAMERON WARNED NOT TO MEDDLE

Scotland has many of the trappings of an independent nation - its own flag, sports teams and a history of achievements in science and literature.

The SNP argues that Scotland would prosper as a small country in its own right. Salmond told Reuters last year that Scotland would be entitled to the lion's share of North Sea oil revenues if it went its own way.

He also wants Scotland to have its own forces and foreign policy, rejecting nuclear submarines based close to Glasgow.

An Ipsos MORI poll last month found that, among Scottish voters certain to vote in a referendum, 38 percent would vote for full independence, up three points from August, while 58 percent were opposed.

Nicola Sturgeon, Salmond's deputy first minister, said the timing of any vote should be decided by the Scottish people and that Cameron's intervention could backfire.

Most people in Scotland listening to David Cameron will say, I think, here we go again, another Tory-led government trying to interfere in decisions that rightly belong to the Scottish people, she told BBC Radio.

The more a Tory government tries to interfere in Scottish democracy, then I suspect the greater the support for independence will become, she added.

The Conservatives are weak in Scotland, having only 15 seats in the 129-member Scottish parliament.

However, the Conservatives, their Liberal Democrat allies in the British coalition and Labour all oppose Scottish independence which they say would weaken both Scotland and Britain.

(Reporting by Keith Weir; editing by David Stamp)