Leaving the EU Single Market will cost the government an extra £8bn in lost tax receipts and result in financial services firms leaving London, the Institute for Fiscal Studies (IFS) has said.
The revered number crunchers have argued today in a new paper that any Brexit deal which does not result in the UK remaining a member of the single market will accentuate the negative economic fallout from the UK's vote to leave the EU.
"Membership is likely to offer significant economic benefits, particularly for trade in services," Ian Mitchell of the think tank said.
The IFS acknowledged that staying in the single market "may come at the cost of continuing to contribute to the EU Budget and accepting future regulations designed in the EU." However, it concluded: "The financial benefits are real and, at the moment at least, likely to outweigh the financial costs."
The body also downplayed the idea that a swathe of new trade deals with countries outside the EU could replace the UK's current relationship with the other 27 countries that account for 44 per cent of UK overseas sales.
"Even small proportionate losses in trade, or lost growth in trade, with EU would require quite dramatic – and probably implausible – increases in trade with such countries."
In a stark warning to the City, the IFS added: "Anything short of actually being in the Single Market would mean that passporting [rights] were foregone and [financial services] firms would be likely to need an EU-based subsidiary."