Under the so-called ‘hard Brexit’ option, the UK would leave the single market and adopt World Trade Organisation rules for trade with Europe.

The outcomes if this option is adopted are outlined in a draft briefing paper for Cabinet, which has been leaked to the Times newspaper.

It says: ‘The Treasury estimates that UK GDP would be between 5.4% and 9.5% of GDP lower after 15 years if we left the EU with no successor arrangement, with a central estimate of 7.5%.

‘In headline terms, a) trade would be around a fifth lower than it otherwise would have been; b) foreign direct investment would also be around a fifth lower and c) the level of productivity would be driven down by these reductions in trade and investment causing an overall reduction in the economy’s efficiency in the long run.

The paper also states: ‘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 £38bn and £66bn per year after 15 years, driven by the smaller size of the economy.’

The forecasts are based on information prepared for the previous Chancellor, George Osborne, in the run up to the referendum on June 23.

Neither the Treasury nor the prime minister’s office has made any comment on the document, which would need Cabinet approval before being circulated publicly and which is believed to be one of a series prepared to illustrate potential outcomes post-Brexit.

Yesterday David Davis, secretary of state with responsibility for Brexit, made a statement in the House of Commons on the next steps in leaving the EU. This begins with the great repeal bill that will mean the European Communities Act ceasing to apply on the day the UK quits, which Davis announced would be introduced at the next parliamentary session.

‘The great repeal bill is not what will take us out of the EU but what will ensure the UK statute book is fit for purpose after we have left - and put the elected politicians in this country fully in control of determining the laws that affect its people’s lives. Something that does not apply today.

‘In order to leave the EU, we will follow the process set out in article 50 of the EU treaty. The prime minister will invoke article 50 no later than the end of March next year,’ Davis said.

Davis said the aim was to ‘deliver an exit in the most orderly and smooth way possible, delivering maximum certainty for businesses and workers.’

He also made clear that the government will oppose any challenge to the referendum result or its decision to begin negotiations on the article 50 process.

‘As I have said, the mandate is clear, and we will reject any attempt to undo the referendum result, any attempt to hold up the process unduly, or any attempt to keep Britain in the EU by the back door by those who didn’t like the answer they were given on June 23,’ Davis stated.