David Davis says the pound crashing after a no-deal Brexit would be “not a bad thing” – and insists “fear” will force the EU into further compromise.

The arch-Brexiteer also branded Theresa May’s deal worse than staying the EU, as he urged MPs to drive a “stake through its heart”, in next week’s landmark vote.

And he claimed foreign investment is “going up” since the referendum result, despite the government’s own figures revealing a sharp drop.

Sterling fell sharply after the 2016 referendum, making people poorer by pushing up the cost of importing food and fuel to Britain.

But, in the interview, with parliament’s House magazine, Mr Davis – who resigned as Brexit secretary, in protest at the Chequers plan – insisted the UK had nothing to fear from a similar result, if the UK crashed out of the EU with no agreement.

Denying the pound would “go into freefall”, Mr Davis said: “The first thing that will happen is it will go about five, ten points down further from the 15 it already is.

“So, we’ll end up 20 or 25 below what it was before the referendum. That’s not a bad thing. The pound’s always been too high from the point of view of industry because of the effect of the City.”

Mr Davis argued the fall would more than cancel out any new EU tariffs, saying: “Our competitive position with vis-a-vis Europe would be dramatically better even if there are tariffs.”

He also claimed: “There have been lots and lots of scare stories about factories moving and banks moving and so on. Most of that hasn’t manifested itself.

“It’s come down to a few hundred people rather than a few thousand people in individual cases. I always expected that.”

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And he added: “Foreign direct investment is going up, not going down. We can do things if we’re not inside the Union which are under WTO [World Trade Organisation] rules to help some bits of our industry.”

Asked about next week’s vote, Mr Davis said the prime minister’s response to the expected defeat would depend upon “the size of the rebellion”.

Arguing Ms May would attempt to tweak her deal if the defeat was small, he said: “The first thing is to stop that happening.

“We’ve got to make sure that this doesn’t come back. We’ve got to make sure the stake goes through its heart and it gets buried at the crossroads.”

The former Brexit secretary also dismissed the growing pressure – including from some Conservatives – for a Final Say referendum on the Brexit outcome.

“There is going to be parliamentary guerrilla war against it. So, it won’t happen. It will take a year – are we going to suspend all this for another year?” he asked.

And he insisted the UK still had the power to force the EU into a ‘Canada-style’ free trade agreement, replacing the current deal on offer.

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“Fear will, nevertheless, drive them towards a reengagement in the negotiation,” Mr Davies claimed.