The real costs of Brexit are on the agenda, with the Treasury warning it could cost as much as £3 trillion over the course of the next Parliament.
But in an analysis by the Resolution Foundation think tank, the figure could be far higher.
It says the costs could reach £2 trillion by 2027.
It is based on a scenario in which Britain leaves the EU without a deal on the future trade relationship with the EU, leaving Britain with no deal at all.
But the Treasury has said this would be “far less than the UK’s present trading position” and it is the “worst-case scenario” to assume.
“The reality is that if Britain leaves without a trade deal, it will leave with a large trade deficit,” said Philip Stephens, the foundation’s senior vice president for policy.
“And that will cause serious disruption to the UK economy and the global economy.”
The Treasury has forecast that Brexit could cost the UK an extra £2.4 trillion in economic output and raise unemployment to as high as 13 per cent by 2026.
Brexit: what you need to know About £2,600 per year for a household to stay in work, plus the cost of health insurance and childcare £2 million per year to cover household bills, and a £100,000 per year loss in productivity and savings for businesses £1.5 trillion in lost economic output – the impact on GDP that would have been caused by leaving the EU The biggest costs are likely to be on the manufacturing sector, which is forecast to be hit the hardest by the Brexit-related impact.
According to the Resolution Institute’s analysis, the impact could be “in the region of 1.5 to 3 per cent of GDP, with a further 1.4 per cent hit on the service sector, where the biggest impacts would be on services.”
The Brexit-linked impact on the economy could have an impact on productivity.
A reduction in output from a factory could lead to an increase in output at the same level of wages, but a reduction in productivity could lead the UK to fall behind the EU’s other member states in terms of jobs and output.
“For the UK as a whole, we’re forecasting a significant reduction in the level of output of the manufacturing and service sectors,” Mr Stephens said.
“We’re also expecting to see a significant increase in the number of people employed in those sectors.”
This could lead some businesses to close, he added.
“That could lead in some cases to a reduction of employment, which could have a negative impact on output.”
This is likely to impact on all sectors, including the service and manufacturing industries, which have been affected by Brexit, the Institute said.
Brexit risks will also hit other sectors, especially the health service.
“If we leave without a clear trade agreement, then we may not be able to keep up with our healthcare commitments, and we may lose access to a number of medicines that have been provided for free by the European Union,” Mr Stephanie Long, senior director of public policy at the NHS Confederation, said.
However, the NHS is one of the key sectors where Britain can rely on the European Single Market to deliver healthcare, as it will be the only EU-based service in the UK.
The Government is also warning of the possible impact on tourism.
“While we will continue to deliver services in the EU in the way that we do today, the Government will not guarantee the level and type of services that will be available in the new relationship,” Mr Evans said.
The Office for Budget Responsibility said Brexit could lead “to a significant decline in the size of the economy”.
The Office also said the UK would have to cut its annual spending by 3 per and 4 per cent, which would mean the cost to the economy would be more than £1,300 per household, per year.
“In addition, the loss of trade with the UK could have negative consequences on our economic recovery, particularly in the short term,” the Office said.
In addition, it said the cost would be paid for by the UK through higher taxes on households, which it estimated would cost an additional £2 billion per year over the next decade.
“These costs are expected to be borne by the economy, which will have to spend more to meet its public finances,” it said.
For the time being, the UK has said it will negotiate a trade agreement with the European Commission, but it is understood the talks have not been “inclusive”.