CRASHING out of the EU without a deal would plunge the UK into a recession that would swallow up any so-called Brexit dividend, the government’s independent forecasting body has predicted.

In a grim and stark warning, the Office for Budget Responsibility said a hard-Brexit on October 31 could lead to a rise in inflation, a 10% drop in house prices, a squeeze on incomes, and push unemployment above 5%.

They said tax receipts would fall markedly, requiring almost £30bn in extra public sector borrowing.

It’s the first time the government’s official budgetary watchdog has analysed a no-deal Brexit.

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The figures, published in their biannual Fiscal Risks report, showed that any money saved from no longer paying the EU’s membership fees would be quickly swallowed up.

The OBR said the recession would be as bad as the one suffered in the 1990s but not as bad as the slump of the financial crisis in the late 2000s.

However, the watchdog said its assessment was “relatively benign” as it was based on the more optimistic of two scenarios recently produced by the International Monetary Fund.

Chancellor Phillip Hammond told Reuters: “The report that the OBR have published this morning shows that even in the most benign version of a no-deal exit there would be a very significant hit to the UK economy, a very significant reduction in tax revenues and a big increase in our national debt – a recession caused by a no-deal Brexit.”

“But that most benign version is not the version that is being talked about by prominent Brexiteers.

“They are talking about a much harder version which would cause much more disruption to our economy and the OBR is clear that in that less benign version of no deal the hit would be much greater, the impact would be much harder, the recession would be bigger.

“So I greatly fear the impact on our economy and our public finances of the kind of no-deal Brexit that is realistically being discussed now.”

Both Tory leadership contenders have said they will take the UK out of the EU by October 31.

John McDonnell, Labour’s shadow chancellor, said: “It’s obvious the Conservative party constitutes a clear and present danger to the economy and the wellbeing of everyone in the UK.”

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SNP deputy Westminster leader Kirsty Blackman said the “damning forecasts” were a “stark reminder of the sheer foolishness and irresponsibility of Brexit, which we know will leave us all poorer and worse off.”

The Aberdeen North MP said it was “no surprise” support for independence was growing.

“The Tories reckless rush towards recession due to their Brexit obsession is a price that Scotland must not pay.

“We already know that Tory plans to drag us out of the EU against our will would inflict serious and lasting harm, with the potential to destroy 100,000 Scottish jobs and cost every person £2300 a year.

“The OBR’s warnings that the UK would plunge into recession and leave a £30bn black hole in public finances adds to the absurdity and madness of Brexit.”