Personally, I don't use the word, but here's my take on it.
The word is, or should be, only racially sensitive if used in a racial way. You can look at many countries from Argentina ( Argie ) to Afghanistan ( Afghan ) and Japan ( Jap ) to Scotland ( tw@
) and shorten their names, but it must be the intent that is brought into question before the word itself surely.
Most of it is lazy use of language more so than racial intent, but political correctness has grabbed hold of certain words rightly or wrongly and by outlawing them given true racists amunition. I'm sure most men or women from Pakistan would probably be more offended if called Indian.
I personally don't like being called a Brit, not that it has any racial implication, but more so because I look upon myself as English.
I really don't want to be approximated when establishing my identity, and dislike forms that only offer British, or UK as options just as I'm sure someone from a South American country may prefer to be associated with their country of origin.
Again, it's mostly laziness.
Establishing the difference between laziness, and intended racism should really be judged on each individual case, and not blanketed in political acusal.
As for racism itself, I have no time for it.