The 2016 Strictly Come Dancing contestant was among researchers at America’s Harvard Kennedy School where he is a senior fellow who compiled the findings from interviews with more than 80 small and medium-sized firms and trade bodies.
The overwhelming majority who voiced an opinion wanted to stay in the customs union, the report said.
A majority also wanted Britain to remain in the barrier-free single market after Brexit, believing that new free trade deals would be less good.
Theresa May insists Britain will leave the single market and customs union when it quits the EU.
Labour’s official policy is also to leave both but there is speculation Jeremy Corbyn will cave into pressure from his anti-Brexit wing who want to keep as close ties as possible with the EU.
Former Cabinet minister Mr Balls said it was “the most detailed, in-depth study of the views of small and medium-sized businesses which has been done academically since the referendum.
“They say they don’t know where we are going in terms of the end state or the transition. They are saying – in a way which surprised us – ‘we want to stay in the customs union, we either want to be in the single market or an FTA which gets close to that’.
“They are saying to us that it is having a direct impact now on business decision-making, on investment, on employment. So the issue is, will we end up with a Brexit which is good for jobs, investment or not?
“What we are hearing here from small and medium-sized companies is they are very fearful this uncertainty and potential for a hard Brexit could cause quite big damage to the British economy.”
Labour and Brexit-backing retail millionaire John Mills, founder of home shopping firm JML, who also took part in the survey, hit back: “A lot of these concerns are greatly exaggerated.”
Tory MP Andrew Bridgen noted pointedly that former Shadow Chancellor Mr Balls lost his House of Commons seat in the 2015 general election.
Responding to the business survey, Mr Bridgen said: “As Ed Balls knows, there are only two polls that matter: when he lost his seat in the general election and when Leave won the referendum.”
The Prime Minister’s former joint chief of staff and Brexiteer Nick Timothy also warned against trying to stay in the customs union. Being in it would stop Britain embracing some of the opportunities to be gained outside the EU and could also make UK institutions like the NHS vulnerable to be undermined by new deals the bloc negotiated with other countries.
Mr Timothy said: “We should want a comprehensive trade agreement with the EU, including regulatory co-operation and a close customs partnership, but we must leave the customs union.”