DAVOS, Switzerland (Reuters) - British finance minister Philip Hammond hit back at supporters of a no-deal Brexit on Thursday, telling business leaders that leaving without a deal would break promises made in the 2016 referendum and risk fuelling populism.

While a no-deal Brexit is seen as tolerable or even desirable by many Brexit supporters within the Conservative Party, Hammond has long supported a softer Brexit, though rarely in such direct terms.

"Not leaving would be seen as a betrayal of that referendum decision. But leaving without a deal would undermine our future prosperity, and would equally represent a betrayal of the promises that were made," he told a Confederation of British Industry (CBI) event at the World Economic Forum in Davos.

Opposition Labour Party leader Jeremy Corbyn has refused to meet May to discuss Brexit until she rules out a no-deal option, and lawmakers outside government are seeking to block it.

Earlier on Thursday, Airbus warned it could shift future wing-building out of Britain in the absence of a smooth exit from the EU, and predicted "potentially very harmful decisions" for its British operations in the event of no deal.

Concern about a 'backstop' agreement for the border between the British province of Northern Ireland and the Republic of Ireland has been a major sticking point for Conservative Brexit supporters, who fear the EU will use it to extract concessions on British sovereignty after Brexit.

"Ingenuity and flexibility" from the EU, as well as "a spirit of compromise" from some Conservative lawmakers would be needed on this area to reach a satisfactory agreement, Hammond said. "Failure to do so could lead to instability (and) populism," he added, according to a text of his remarks provided by his office.

British businesses are deeply concerned by the government's refusal to rule out a no-deal Brexit which would entail lengthy delays for cross-border trade if it cannot get parliamentary support for its preferred withdrawal plan.

CBI Director-General Carolyn Fairbairn warned of "another bleak day for British business" on Monday after May announced little substantive change to her Brexit plans in response to their historic defeat in parliament.

On Tuesday, James Dyson, a billionaire Brexit supporter who revolutionised vacuum cleaners with his bagless technology, said he was moving his head office to Singapore from Britain to be closer to his company's fastest-growing markets.

(Writing by David Milliken; Editing by Mark Potter and Stephen Addison)

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