The UK economy would be five per cent bigger under a Labour government than a Conservative government by 2022, according to Citi forecasts.

Just months after it was reported that major banks had warmed to the idea of Jeremy Corbyn as Prime Minister, new economic forecasts suggest Britain could be significantly better off under his stewardship.

The report said Britain’s economic fortunes were tied up with the outcome of Brexit and a possible general election, leading to the conclusion that the outlook would be much brighter if Mr Corbyn led the next government rather than Mr Johnson.

Worsened dramatically

Christian Schulz, an economist and director at Citi, said that its base case forecast was for a no-deal Brexit if the Conservatives won an election and an end to Brexit if Labour was the strongest party in a coalition government.

The pre-Budget report said the outlook for the public finances had “worsened dramatically” since the spring and would deteriorate further if Britain left the EU without a deal.

As a result, forecasts show the economy could be five per cent bigger under Labour than the Conservatives by 2022.

No space for tax giveaways

The report also warned that there is no room for tax giveaways like the ones Chancellor Sajid Javid promised at the Conservative Party conference.

He will look to significantly increase public spending for 2020-21 by £13.4 billion to meet the UK prime minister’s pledges on police and schools.

Alongside the earlier pledges to increase NHS spending, the IFS calculated that the government’s current spending plans had a Corbynite tinge and were barely recognisable from the promises of Theresa May at the last election.

The IFS said the budget deficit was likely to be £52.3 billion in 2020-21, more than double the £21 billion forecast by the OBR in March.

Paul Johnson, director of the IFS, said: “The big spending increases about a month or so ago . . . put the Conservative day-to-day spending on public services next year closer to what Labour had in its 2017 manifesto than the Conservatives had in theirs”.

“Given the huge uncertainty we’ve got coming over Brexit, there really isn’t space in any forthcoming Budget for any permanent tax giveaways,” Mr Johnson added.

Related: Government reveals ‘desperate’ strategies to ’scupper’ delay to Brexit this month