A “disorderly” no-deal Brexit in March could plunge the UK economy into a larger recession than the global financial crisis a decade ago, according to the Bank of England.

In a worst case scenario modelled by the Bank, the UK’s economy would contract by 8 per cent, house prices would fall by a third, unemployment would spike to 7.5 per cent, interest rates would shoot up to 5.5 per cent and the value of the pound would fall to below $1.

Such a fall in GDP would be deeper than the 6.25 per cent plunge in gross domestic product seen in 2008-09, which was itself worse than anything seen since the Second World War and the most severe drop since the 1920s.

The Bank stressed that it was modelling the scenario to be sure that the UK banking sector was resilient enough to withstand such an economic crisis, rather than making a forecast of what was likely to happen.

But the nightmare scenario presented by Threadneedle Street is nevertheless likely to pile pressure on MPs to shut down the possibility of Britain crashing out of the European Union with no deal next year, and presents a challenge to those Brexiteer MPs who have insisted it would be tolerable.

The study, part of the Bank’s latest financial stability report, comes after the government’s own long-term economic scenario analyses, published earlier on Wednesday, showed that no possible Brexit deal, including Theresa May’s preferred one, would benefit the economy over the next 15 years.

In the Bank’s direst scenario the UK would suddenly face tariffs on its goods being exported to the EU, as well as a host of intrusive regulatory checks, resulting in “severe disruption” at the border. The UK would also instantly fall out of the coverage of the European Union’s dozens of trade deals with other countries, from Mexico to South Korea.

Even in a “disruptive” no-deal Brexit scenario next year, as modelled by the Bank – which assumes third country trade agreements would be rolled over and that financial conditions do not tighten so severely – there would be a 3 per cent fall in GDP, a 14 per cent drop in house prices and a rise in unemployment to 5.75 per cent. This in itself would be a serious recession by historic standards in the UK.

The Bank’s most recent forecasts assume a “smooth” Brexit in March, rather than no deal, but the governor, Mark Carney, warned earlier this month that interest rates may well need to rise to curb inflation if we crash out.

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The Bank’s Financial Policy Committee, which analysed the various no-deal scenarios, said it “judges that the UK banking system is strong enough to continue to serve UK households and businesses even in the event of a disorderly Brexit”.

The committee even claims that the UK financial system could withstand a combination of a disorderly Brexit and a global economic downturn.

“The Bank of England is ready for Brexit, whatever form it takes,” said Mr Carney at a press conference on Wednesday.

“The analysis released today confirms that the core of the UK financial system is resilient to worst-case Brexit outcomes.”

But he also warned that the country in general seemed far from prepared.

“Surveys suggest that less than half of businesses have initiated contingency plans for no deal. Up to 250,000 traders have never completed a customs declaration,” he said.

Separately on Wednesday, the Bank also produced some scenarios, at the request of the Treasury Select Committee, looking at how the UK economy could evolve based on various types of post-Brexit trading arrangements with the EU.