"So exiting both the customs union and the single market would therefore be economically costly: it would introduce frictions to UK/EU trade that do not currently exist, which means reduced trade volumes between the UK and EU and therefore lower incomes all round."

Prime Minister Theresa May confirmed that Britain plans to leave the single market as part of its withdrawal from the European Union in a speech on Tuesday.

The prime minister told an audience of foreign diplomats and ambassadors that she would terminate Britain's membership of the free-trade area to have full control over immigration from the European Union.

This was confirmed by Chancellor Philip Hammond, who told the House of Commons on Tuesday morning that Britain would no longer be in the European single market once the Brexit deal is finalised. "We will go forward understanding we cannot be members of the single market," he said.

"What will be the precise economic costs? No-one can be sure because there are no recent precedents for this type of action," Bank of America said. "But the evidence suggests that the costs will be large, of the order of 5-10% of GDP over perhaps 15 years. This is one reason we are pessimistic about UK trend growth."