Theresa May claims no deal ‘not the end of the world’ despite Treasury warnings

The prime minister's tone stands in stark contrast to a letter from Philip Hammond highlighting a risk to the economy

Theresa May has brushed aside Treasury warnings that a no-deal Brexit will seriously damage the UK economy, claiming instead it “wouldn’t be the end of the world”.

The prime minister suggested forecasts highlighted by the chancellor, Philip Hammond, that up to 10 per cent would be wiped of GDP, were a “work in progress” and may even be rewritten.

Her tone is at odds with the letter written days ago by Mr Hammond emphasising that, regardless of any revision to forecasts, officials still expect a “damaging effect on the economy and public finances” in the event of no deal.

Ms May’s comments, made as she flew to South Africa on a trade trip, also risk reigniting the Tory row sparked by the letter, which went on to underline how a no-deal Brexit would require £80bn of extra borrowing.

Asked about the forecasts, Ms May said: “First off, as I understand, the chancellor was talking about a set of figures that, when they came out in January ... [I said] they were work in progress at that particular time.

“Look at what the director of the WTO has actually said. He said about a no-deal situation that it would not be a walk in the park, but it wouldn’t be the end of the world.”

Asked whether the Treasury figures might even be changed, Ms May said: “I said it was a work in progress in January.”

While Mr Hammond’s letter accepted some “refinement” was taking place, the chancellor clearly stated: “However, we expect the analysis to show that for scenarios in which we have higher barriers to trade with the EU there will be a more damaging effect on the economy and public finances.”

The letter – suggesting that under a no-deal scenario GDP would be as much as 10 per cent lower after 15 years compared with if the UK had stayed in the EU – has enflamed the Tory row about the government’s approach to Brexit, with Eurosceptics accusing the chancellor of being needlessly gloomy.

Brexiteers were particularly enraged because the letter was released just as Brexit secretary Dominic Raab published a series of documents aimed at showing the UK was adequately prepared for a no-deal outcome.

On Monday a failure to reach an agreement looked increasingly likely after French president Emanuel Macron indicated Ms May’s proposals for a withdrawal agreement might undermine the integrity of the single market, a price he said was not worth paying.

Despite having recently held talks with Mr Macron to try and sell her plans, Ms May remained positive, saying: “We want to see a continuing strong European Union.”