Brexit: Grim economic forecasts as top Labour figure says Final Say referendum ‘inevitable’

Britain is set to be poorer under every kind of Brexit according to two major official studies, released as Jeremy Corbyn’s closest ally said a fresh referendum now looks “inevitable”.

Pressure to give the British public a Final Say on leaving the EU mounted after Treasury estimates suggested Theresa May’s Brexit deal will leave GDP 3.9 per cent lower than if the UK remain in the bloc.

A separate Bank of England study warned of an economic catastrophe in the case of a no-deal departure, including an immediate, savage recession, soaring interest rates and collapsing house prices.

Amid the grim data, shadow chancellor John McDonnell gave the strongest signal yet that Labour would swing behind a people’s vote if Ms May’s plans are now blocked by the Commons as expected.

The drive for a new referendum will pick up pace on Thursday as Conservative former minister Jo Johnson delivers a speech warning his party faces electoral armageddon if it forces Ms May’s deal through.

The prime minister again tried to defend the deal in parliament as it came under fire from all sides, and she will face a further intense grilling from a committee of the most senior MPs on Thursday morning.

Government estimates released on Wednesday suggested the UK economy would be 3.9 per cent lower in 15 years under Ms May’s Brexit plan – independent experts suggested that equated to £100bn a year or £1,000-a-head.

The long-term economic analysis also found wages would be 2.7 per cent lower and borrowing could be pushed up by up to £26.6bn over the same timeframe.

The data highlighted a cabinet rift, when Mr Hammond conceded the UK would be poorer under all Brexit scenarios but Ms May’s officials attempted to argue this was not the case because the analysis did not take account of government action to mitigate negative impacts on the economy.

The gloomy forecasts were echoed later in the day by the Bank of England, which indicated that under a disorderly no-deal Brexit, the economy could shrink by 8 per cent within a single year, property prices might plunge almost a third, the pound would crash and interest rates soar under a worst-case scenario.

Brexiteers attacked the data and the bank itself, with Jacob Rees-Mogg saying: “It is unusual for the Bank of England to talk down the pound and shows the governor’s failure to understand his role. He is not there to create panic.”

Conservative MP and Treasury Select Committee member Simon Clarke said: “The Bank of England produces forecasts modelling a wide range of possibilities, many of which they themselves say are extreme. This should not be read as a likely future forecast.

“Our country’s fundamental strengths are enormous – as the chancellor often says – and we should have confidence that we will succeed in any scenario.”

But the new economic data created the backdrop for an interview with Labour shadow chancellor John McDonnell, who was asked about the party’s position on a new referendum.

At conference in September it was agreed that if the government’s deal falls Labour would seek an election, and if that fails all options would be on the table, including campaigning for a new referendum.

But in comments that appeared to go further, Mr McDonnell said: “If [an election] is not possible, we’ll be calling upon the government then to join us in a public vote.”

Asked if it was “inevitable” that there would be another vote, he said: “That’s right. Our policy is if we can’t get a general election, then the other option which we’ve kept on the table is a people’s vote.”

Labour spinners later argued that Mr McDonnell’s words had not gone beyond the official party position, which also suggests there are alternatives to a new referendum, and were adamant the Labour is not unchanged.

But Labour MP Stephen Doughty, who backs a people’s vote, said his comments were “very welcome”, adding: “It would be good to see this repeated and reinforced as it becomes clearer by the hour that we need a way through this Brexit chaos.

“It’s clear that it is the will of Labour members and voters across the country.”

Another Labour MP who wants a new vote said: “I don’t believe a word he said. It’s all playing games.”

The Independent has launched a campaign for a Final Say referendum on Brexit, which has attracted more than a million supporters so far.

Another backer of a new vote, Conservative MP Mr Johnson, was set to speak on the dangers to his party of pursuing Ms May’s deal.

Referring to Tony Blair’s landslide victory two decades ago when the Tories lost 178 seats in the Commons, he was to say: “Brexit is seen as a project driven by the Conservative Party and this half-baked worst-of-all-worlds Brexit could trigger an electoral defeat on the scale of 1997 or worse, this ‘Tory Brexit’ label an albatross around our necks for years to come.”

On Thursday morning Ms May will take questions from the Liaison Committee, made up of the chairs of all the Commons select committees, and chaired by Conservative MP Sarah Wollaston – another backer of a people’s vote.

The PM will then fly to Argentina for a meeting of the G20 group of nations, where the impact of Brexit on international relations will be discussed in a series of bilateral meetings.