The UK economy could face a long-run hit of up to 8 per cent of GDP in the event of a no-deal Brexit, the International Monetary Fund has warned.

That’s the equivalent of around £6,000 per British household.

“A scenario in which future trade between the UK and the EU is governed by [World Trade Organisation] rules is estimated to bring about output losses of around 5 to 8 percent compared to a no-Brexit scenario in the long run (with an average of about 6 per cent),” the IMF said.

However its economists also warned that this assumed a smooth transition to WTO rules and that the impact of a chaotic no-deal Brexit in the short-term next March could be more severe, leading to a “sharp fall in asset prices”, a “hit to consumer and business confidence” and another sterling depreciation.

“Directors emphasised the importance of a timely agreement with the EU, accompanied by an implementation period to avoid a cliff-edge exit in March 2019 and to allow firms and workers time to adjust to the new relationship”.

Delivering its full annual health check on the UK on Wednesday, the Washington-based Fund also said that the British economy would be around 3 per cent weaker even if it successfully secured a “Canada-style” free trade deal with the rest of the European Union “due to lower trade, migration and productivity”.

An “European Economic Area-type” arrangement, in which the UK stays in the single market, would led to a long-term hit of 1.5 per cent, driven by new non-tariff barriers.

The figures are broadly in line with the projections produced by the Brexit department earlier this year, which saw an 8 per cent long term hit from a “WTO” Brexit and 5 per cent damage from a free trade deal scenario.

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The IMF report was released as Theresa May was set to ask her Cabinet to support the EU Withdrawal Agreement she has secured with the EU.

Assuming there is no chaotic Brexit, the IMF is projecting growth in UK GDP this year of 1.4 per cent, rising slightly to 1.5 per cent in 2019.