Image copyright Getty Images The UK could face an extra two years of austerity measures if it votes to leave the EU, the Institute for Fiscal Studies (IFS) has said.
The consensus of economists was that the UK economy would shrink after a Brexit, the think tank said.
It warned ministers could react to a post-Brexit GDP fall with either deeper cuts, or by extending them.
But Andrea Leadsom, the energy minister and Vote Leave campaigner, said Brexit would "turbocharge" the UK economy.
A vote to leave would let the UK "secure our economic security for future generations based on expanding our trade across the globe, turbocharging our economy and taking control of our borders", she said.
Military warning
The IFS assessment comes as a dozen former senior military officers have warned that the EU's policies are undermining the UK's combat effectiveness.
Speaking out in favour of Britain leaving the EU, they said Nato, and not the EU, should remain the cornerstone of Europe's defence.
Ex-military officers fight for EU exit
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Would Brexit add two years to austerity?
Vote Leave focuses on immigration
The IFS said a vote to leave could result in a £20bn to £40bn hit to the public finances in 2019/20, if GDP was 2.1% to 3.5% lower over the period, as predicted by the National Institute of Economic and Social Research (NIESR).
Paul Johnson, IFS director and an author of the report, said: "Getting to budget balance from there, as the government desires, would require an additional year or two of austerity at current rates of spending cuts."
Why this issue matters What the leave and remain sides are saying about trade and the economy in the #EUref campaignThe debate
- About half of UK trade is conducted with the EU
- The EU single market allows the free movement of goods, services, capital and workers
- Trade negotiations with other parts of the world are conducted by the EU, not individual member states
Leave
- UK companies would be freed from the burden of EU regulation
- Trade with EU countries would continue because we import more from them than we export to them
- Britain would be able to negotiate its own trade deals with other countries
Remain
- Brexit would cause an economic shock and growth would be slower
- As a share of exports Britain is more dependent on the rest of the EU than they are on us
- The UK would still have to apply EU rules to retain access to the single market
The IFS said the UK could use its contribution to the EU - estimated at £8bn a year - to help shore up its finances if it voted for Brexit.
However, it said this could be overshadowed by the negative impact on the UK economy, with a 0.6% fall in national income offsetting the benefits.
Mr Johnson said: "Leaving the EU would give us an immediate £8bn boost to the public finances, but the overwhelming consensus is that the economy would be smaller than otherwise following Brexit.
"If the economy is just a few percentage points smaller than it otherwise would have been, we will be a bit worse off."
The UK "could perfectly reasonably decide that we are willing to pay a bit of a price for leaving the EU and regaining some sovereignty and control over immigration and so on", Mr Johnson said.
"That there would be some price though, I think is now almost beyond doubt."
Image copyright Getty ImagesVote Leave questioned the neutrality of the IFS, saying it was "a paid-up propaganda arm of the European Commission".
It said that the NIESR, whose figures the IFS based its calculations on, "has been wrong time and time again on the EU".
Patrick Minford, co-chairman of Economists for Brexit, said that the IFS analysis acknowledged that the free trade approach recommended by his organisation "would be the best option for the UK following an exit from the EU".
Gerard Lyons, his co-chairman, added: "The UK needs to break away from the short-termism and the groupthink that had dominated UK policy making and embrace Brexit as this is the best way to position the economy for longer-term future growth."
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