Brexit: Britain will be poorer if MPs back Theresa May’s deal to leave EU, Chancellor Philip Hammond admits

'There will be a cost to leaving the European Union because there will be impediments to our trade'

Britain will be poorer if MPs back Theresa May’s Brexit deal, Philip Hammond has admitted, as he prepared to publish new official forecasts.

In an extraordinary interview, the chancellor acknowledged that “remaining in the single market” – rejected by the prime minister – was the best way to secure the country’s economic future.

Asked if the fresh analysis would show that leaving the EU would be “detrimental”, he replied: “Yes, you are right in that analysis.”

Mr Hammond said: “Purely from an economic point of view, there will be a cost to leaving the European Union, because there will be impediments to our trade.”

And, asked if the forecasts would show it was “better to stay” in the EU, he added: “If you look purely at the economy, remaining in the single market would give us an economic advantage, yes.”

The comments come after Ms May tried to argue the UK could still be better off outside the EU under her withdrawal plans – ahead of a landmark vote by MPs on 11 December

Mr Hammond also appeared to acknowledge that parliament would dictate what happened next, if – as seems certain – the deal is rejected.

“We will have to look at the parliamentary arithmetic, look at the decision parliament has made and decide what is the best way to proceed,” he told BBC Radio 4’s Today programme.

The prime minister used to insist that rejection of her deal would mean the UK crashing out of the EU with no agreement, but has recently admitted there could be “no Brexit at all”.

The government analysis is expected to say that GDP will be 1-2 per cent lower after 15 years of the prime minister’s proposals, compared with Britain staying inside the EU.

A ‘Norway-style’ relationship, remaining in the single market, would deliver a similar economic hit, while a ‘Canada-style’ free trade deal would swipe about 5 per cent from GDP.

The statistics could allow Ms May to argue that her deal offers very similar economic benefits to a Norway-style deal, while ending free movement of EU citizens.

They are also expected to show that a no-deal Brexit would leave GDP 7.6 per cent lower – equivalent to £150bn over 15 years.

In the interview, Mr Hammond argued Ms May’s deal offered “other benefits”, including control of borders, the ability to sign independent trade deals and fishing rights.

And, arguing Ms May’s deal would “minimise the economic impact” and be “entirely manageable”, he said: “The economy will be slightly smaller in the prime minister’s preferred version of the future partnership.

“The economy will continue to grow throughout that period because of fundamental strengths – this is a very modest impact.”

Refusing to concede that the deal was doomed to defeat, Mr Hammond added: “Nobody has yet come up with a better plan – this is by far the best way.”

The chancellor also said Downing Street was right to ignore a Commons motion to publish the full legal advice on the Brexit deal, saying it would be "impossible for the Government to function" if such confidential material was made public.

Mr Hammond was speaking after leading Tory Brexiteer Sir Bill Cash backed Labour's call to reveal what attorney general Geoffrey Cox told the cabinet about the legal implications of the draft withdrawal agreement.