Bank of England (BoE) governor Mark Carney has said the UK economy could enjoy a £16bn "bounce" if Britain negotiates a trade deal along the lines of Theresa May's Chequers proposal.
Details have emerged from a leaked cabinet meeting in which the Bank of England boss revealed he thought May's plan, which seeks a free trade area with the EU on goods and agriculture, would be good for the economy and that losses made since the referendum could be recovered.
Carney's intervention will provide a boost to May's maligned Chequers deal, which has been attacked by politicians such as Boris Johnson, who said it represented a "miserable limbo" for Britain.
At the cabinet meeting, attended by arch-Brexiteers Michael Gove, Jacob Rees-Mogg and Andrea Leadsom, Carney also warned that inflation would rise and house prices would fall by around 35 per cent in the event of a no-deal Brexit, in which the UK would crash out of the EU on terms set by the World Trade Organisation.
One source told the FT, which first reported the story, that Carney said growth would recover from the losses made since the referendum with a Chequers-like deal because it implies "more access to the European market than under current assumptions".
Yesterday Labour's shadow foreign secretary Emily Thornberry said Labour would vote against May's Chequers proposal in favour of pushing for a general election.
She told the FT she could not see May coming back with a deal that satisfies Labour's six tests, including that the new deal must offer the same benefits to the UK as current membership.