A no-deal Brexit would be an economic and social “catastrophe” that could lead to a 1930s-style contraction, the head of the trade body for the UK banking industry has warned.

Stephen Jones, the chief executive of UK Finance, said jobs would be lost and people would be unable to pay their mortgages if Britain “crashes out” of the EU without an agreement.

“A no-deal Brexit on March 29th, where we crash out of the European Union, is a catastrophe,” he told Channel 4 News.

“It’s a social catastrophe, it’s an economic catastrophe. And by implication it is a catastrophe for the industry I represent, the banking industry.

“This is about jobs, this is about people not being able to pay their mortgages, not being able to pay back their loans, and that’s really bad news and it’s an outcome we can avoid.

“I don’t wish to be labelled a doom-monger – and our industry’s job is to cope with whatever circumstances are thrown at us, as best we can – but if our economy contracts by 10 per cent, that’s 1930s-style contraction.

“That is a massive increase in credit card losses, mortgage losses, vehicle loan losses.”

Uncharted territory

On the eve of the crucial House of Commons vote on the withdrawal agreement, Mr Jones said he did not believe it was a “great deal” but said he was concerned about the consequences if it was rejected.

“I think there is a real risk of no-deal happening by accident. If the prime minister’s deal is voted down, we are in totally uncharted territory,” he said.

“It’s not a great deal, there’s an awful lot of money being paid for a political declaration, which quite frankly is not worth the paper it is written on.”

Mr Jones said the position of the City of London had already been diminished by the referendum vote to leave the EU.

“London as the European financial centre appears to most of us to be – frankly, quietly – over,” he said.

“We’ll do our best to retain what we can, within the context of what’s negotiated, no-deal or a deal, but Frankfurt and Paris will become much more important financial centres in a European context.” – PA