Independence will harm Bermuda's economy, international business leaders warn in a secret report leaked to The Royal Gazette .

The politically explosive report says of Independence: It will increase Government spending; It will pump up the cost of doing business here; It will rob Bermuda of effective representation in many worldwide organisations; and It will mean Bermudians will probably need visas for many countries they visit.

The report says the international boat has already been rocked by mere discussions about cutting ties with Britain.

Competitors are exploiting apparent uncertainty over Bermuda's political future, it adds.

It also declares Bermuda will have to "reposition itself in world affairs'', and renegotiate many international treaties.

And it warns the Island risks being left to fend for itself following a natural disaster or outbreak of unrest.

The report, leaked anonymously through the mail to The Royal Gazette , has a damning conclusion.

"International business will look at the initiative of considering Independence as having a negative impact on Bermuda's economy.'' The report has been written by top brass of the International Companies Division (ICD) of the Bermuda Chamber of Commerce.

Among the few behind it is ICD chairman Mr. Adolf Luttke.

He stressed it was a draft report by a handful of members on the ICD's executive committee.

It followed discussions "behind closed doors''. And he was extremely concerned it had been leaked to The Royal Gazette .

"I would like to make it clear it is not a public report. It is only a virgin report -- in an embryonic form.'' Mr. Luttke said the private report would be presented to the ICD's executive in the middle of next month.

If approved, it would go to Premier the Hon. Sir John Swan and the Commission of Inquiry looking into Independence.

Mr. Luttke said Independence would affect all parts of the community.

And it was natural it should be considered by international businessmen.

He pointed out it had been discussed recently by the International Business Forum.

This was a meeting at the Cabinet Office of businessmen, lawyers, bankers and accountants. Sir John attended.

Mr. Luttke said the draft report followed an invitation to the international business community to contribute to the Independence discussion.

He was unsure where the invitation came from -- either Sir John or the chairman of the International Business Forum. "I think it is immaterial.'' The report kicks off by underlining the stability Bermuda has enjoyed over the years.

"Bermuda has developed a strong international business sector which is the envy of many other offshore jurisdictions.

"Bermuda's reputation as the premier international business centre is dependent on international business confidence in the stability of the country and its infrastructure.

"Confidence is as much a result of perception as it is of underlying fundamentals.'' The report states the ICD's executive committee does not see any "advantages or benefits'' for Bermuda's Independence.

"For many years International Business had come to Bermuda, among other reasons, because of its political stability.

"The perception now is that this stability has been adversely affected since discussions about Independence surfaced.

"Clients and shareholders of member companies have already inquired about Bermuda's political future and competing off-shore jurisdictions are already exploiting the perceived uncertainty about Bermuda's political future.'' It continues: "Bermuda's Independence will undoubtedly increase Government expenditures, and therefore increase the cost of doing business in Bermuda.

"These costs must be clearly defined and not be under-estimated. They will obviously compound the costs to be borne by Bermuda's economy due to the closure of all military bases.

"An independent Bermuda will have to reposition itself in world affairs including renegotiating all international treaties, conventions and agreements to which it is party by virtue of its status as a British colony.

"It removes Bermuda's effective representation in the many worldwide organisations.

"There is no indication for its future position vis-a-vis treaties and alliances with those organisations.'' The report says Bermuda may be able to arrange diplomatic representation through Britain or Canada in many parts of the world in which it has no embassy.

Business leaders' secret report From Page 1 But -- being so small and offering no material benefits to other countries -- it will carry no clout.

"At present, Bermudians abroad who get into difficulty enjoy the full protection of the United Kingdom and its very powerful influence in world affairs.

"As an independent nation, Bermuda will not be able to exercise any comparable influence or take any effective action if its citizens are adversely treated.

"It is extremely unlikely that Bermuda, as an independent country, will be able to negotiate visa free access for its passport holders to many of the countries to which Bermudians frequently travel.

"An independent Bermuda removes the guarantee that there will be no fundamental changes to the current legal system, including the right of appeal to the Privy Council.'' There is also a warning about Bermuda's ability to look after itself.

"An Independent Bermuda might be left alone in the event of a natural disaster and r internal unrest due to lack of foreign obligation to assist.'' And the report sounds the alarm again of the damage of mere discussion of Independence.

"Even the discussion about Independence gives rise to a perception of uncertainty in Bermuda's future, which is already adversely affecting the aggressive growth of International Business and dampening the entrepreneurial spirit which has helped to create so many new International Business activities in Bermuda.'' The report calls for current information on the impact and costs of Independence to be updated.

In its summary, the report says Bermuda's United Kingdom ties are a "stabilising influence'' -- whichever political party is in power.

"At this time, the downside risks associated with redefining Bermuda's constitutional structure outweigh any benefits which can be identified.

"After reviewing the Green Paper prepared in 1977 and the White Paper prepared in 1979, we cannot identify any material benefits to International Business resulting from Independence.

"We anticipate that Independence will result in substantial additional costs to the country and the cost of carrying on business in Bermuda will increase.''