If the U.K. opts to cut all its trade ties with the European Union and go for a "hard" Brexit, it could cost the government £66 billion ($81.1 billion) a year, according to a leaked government paper reported by The Times newspaper.
U.K. government ministers have been warned that a "hard Brexit" – in which the U.K. leaves the EU's lucrative single market and instead reverts to World Trade Organization (WTO) rules – could prompt the U.K.'s gross domestic product (GDP) to fall dramatically, the newspaper said.
"The Treasury estimates that U.K. GDP would be between 5.4 percent and 9.5 percent of GDP lower after 15 years if we left the EU with no successor arrangement, with a central estimate of 7.5 per cent," the leaked document noted.
What's more, a hard Brexit would have a massive impact on government revenue.
"The net impact on public sector receipts - assuming no contributions to the EU and current receipts from the EU are replicated in full - would be a loss of between £38 billion and £66 billion per year after 15 years, driven by the smaller size of the economy," the leaked document said.
Such a steep drop in revenue would force ministers to slash public spending or raise taxes, The Times said on Tuesday, having seen a draft cabinet committee paper on the potential economic impact of the U.K's decision in a referendum to leave the EU.