Leaving the European Union (EU) without a trade deal could leave British households almost £1,000 worse off a year, according to a new report.

If Britain left the bloc and reverted back to World Trade Organisation (WTO) rules, there would be import tariffs and the UK would leave the EU Customs Union and the Single Market.

As a result each household is likely to be £960 worse off, the report by multi-national consulting firm Oliver Wyman has suggested.

However, the exact size of the annual impact would vary between £245 and that amount, depending on the type of trade deal the UK gets and whether it can avoid EU tariffs,

Households will face higher prices as they absorb costs from labour changes, tariffs, and red tape, it said, whilst consumer businesses could see profits slump by one to four per cent.

A report by the House of Lords European Union Committee said food prices are likely to rise after Brexit if no trade agreement with the EU is reached and that there could be shortages of some products.

The news comes as Brexiteer Andrea Leadsom admitted that quitting without an agreement would not be an "optimal solution".

She told The House magazine: "The EU has simply not taken us seriously so far in terms of the future agreement. What this deal does is it says to them, 'right, now we can have a free trading area where there won't be the need for border checks and controls'.

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"It's saying to the EU, 'you better take this seriously'. In my view, it's take this seriously or we are heading for no deal. The message to the EU has to be, 'this is the final offer'.

"So, when you say, 'is it flexible?', it's not in the sense of they're going to wriggle away at it and we're going to accept it. It is a very hard and fast offer to the EU that makes sense for them. But if they don't accept it, we're also ramping up our no deal preparations. That's where we will be heading and they will have forced us to do that.

She added: "My message to the EU is, 'take this seriously because otherwise, you're forcing us down the road of no deal'."