The study by the Centre for Economics and Business Research found that every major wealth-creating sector would be affected negatively, with manufacturing hit if there were tariff barriers to EU trade and the creative industries suffering a “body blow” if there were strict controls on immigration.
The report examines the consequences of leaving the single market in favour of a free trade agreement struck on a bespoke basis for individual industries.
Theresa May has hinted she favours this so-called “sectoral” approach but the Cebr report warns that “all major sectors are linked to the EU and could be harmed if the UK government sought a free trade agreement which prioritised some sectors over others”.
The release of the report comes at a time of growing mobilisation among MPs and political figures trying to stop the UK heading for a clean break with the EU single market and customs union, which is favoured by the most Eurosceptic cabinet ministers and leading Brexit campaigners such as Michael Gove.
For the first time since the referendum, MPs from across the parties – Tory Anna Soubry, Chuka Umunna of Labour and Nick Clegg from the Lib Dems – will appear together at an Open Britain event, pushing for continued membership of the single market.
Soubry will accuse those backing of a sector-by-sector deal of pursing a “simplistic fantasy”.
Umunna said: “Every major sector of our economy is linked to the single market and could be harmed through an arrangement that prioritises one sector over another.”
The prime minister has so far refused to reveal her vision for Brexit, but gave a rare newspaper interview this weekend, saying she just wanted to “get on with the deal”.
However, it was reported in the Sunday Times that Mark Carney, the Bank of England governor, supports a transitional deal with the EU to cushion the impact for businesses, by keeping membership on similar terms until at least 2021.
Others warned it may be difficult to stick to the prime minister’s timetable of triggering article 50 by the end of March and leaving two years later in 2019, while avoiding that point becoming a “cliff edge” causing an economic shock.
Lord Kerr, Britain’s most experienced EU negotiator, has estimated the government has a less than 50% chance of securing an orderly exit from the EU within two years.
In a speech at the London School of Economics, he claimed “the fog in the channel is getting thicker all the time”, adding even if an agreement was reached by spring 2019, there was a chance “a demob happy European parliament” in its final months before elections in 2019 would refuse to ratify the deal.
May could also face an obstacle if pressure mounts on the government to hold a second referendum on the terms of the exit deal she strikes with the EU.
Emily Thornberry, the shadow foreign secretary, this weekend left the door open to supporting a second referendum on the terms, saying the Brexit process had to be taken “step by step”.
Asked about Labour’s position, she told BBC1’s Andrew Marr Show: “I think that we need to take this in stages and at the moment we cannot even have a debate as to how it is that we are going to leave the European Union because the government claim they are keeping their cards to their chest.
She said the priority in negotiating a Brexit deal should be the economy, but appeared to also support greater controls on immigration, saying: “Now, do I think that too many people at the moment come into this country? I think that yes, I think they do.”
Author: Rowena Mason and Patrick Wintour