Published: 8:42 AM October 17, 2018 Updated: 6:13 PM September 17, 2020

Tory hardliners have been dealt a blow after a senior US Treasury department official warned that a hard Brexit could hurt global financial stability.

David Malpass, Treasury undersecretary for international affairs, said the US was working with officials in the UK and EU to limit the risks of Britain's withdrawal from the bloc.

The admission was described by one anti-Brexit campaigner as "our closest allies... having to look out for us so we don't do something stupid".

Malpass told a meeting of the Financial Stability Oversight Council yesterday: 'As the timeline for action gets shorter, the need to address potential financial and economic disruption increases.

'We want to ensure that potential spillovers particularly in the event of a hard Brexit are mitigated so that financial stability is maintained.'

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His concern was echoed by Federal Reserve chairman Jerome Powell at the meeting in Washington. The panel is made up of the heads of all US financial regulators,

Malpass said that the Treasury would 'closely monitor' developments with the hope that the parties could negotiate an 'orderly' Brexit with a transition period to mitigate risks.

He met with chancellor Philip Hammond in Bali, Indonesia, last week during the International Monetary Fund's annual meeting, where the pair discussed Brexit.

Labour MP Virendra Sharma, a champion of the anti-Brexit campaign group Best for Britain, described the situation as "a circus". He said: "We were told countries would be lining up to trade with us, but instead our closest allies are having to look out for us so we don't do something stupid. That's not taking back control in anyone's book.

"It seems like everyone but the Brexit extremists can see the cliff-edge of a hard Brexit. Unfortunately, this sinister gang of hucksters and charlatans has put a gun to the country's head.

"The only way out of this trap is for the people to have the final say on Brexit, with the option to the stay."