Britain could be forced to stomach two more years of austerity if it votes to leave the European Union, according to a report.
The Institute for Fiscal Studies (IFS) has warned that the UK Government may look to extend its austerity drive in the aftermath of a Brexit vote as it grapples with a fall in national income and a sharp rise in public sector borrowing.
The respected think-tank said a vote to Leave could see public finances take a £20 billion to £40 billion hit in 2019/20, if gross domestic product is 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."
The IFS said Britain could use its contribution to the EU - estimated at £8 billion a year - to help shore up its finances if it voted for Brexit.
But 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.
It also dismissed claims that the UK would have an extra £350 million a week to spend if it headed for the European exit door, while stating that its £8 billion saving from leaving the EU would be halved if it followed in Norway's footsteps and joined the European Economic Area.
Carl Emmerson, IFS deputy director and co-author of the report, said: "The precise effects of leaving the EU on the British economy and hence the knock-on impact on the public finances is uncertain.
"But the overwhelming weight of analysis suggests that the economy would shrink by more than enough to offset the positive effect on the public finances of the reduced financial contribution to the EU budget."
The IFS report - funded by the Economic and Social Research Council's UK in a Changing Europe scheme - said a vote to leave would increase economic uncertainty in the short term, ramp up the cost of trade and make the UK less attractive to foreign investment.
It said that this trio of pressures could see borrowing come in more than £20 billion higher in 2019, if national income falls in line with NIESR's prediction of 2.1% drop over that period.
It found that the Government would have to find the equivalent of £5 billion of public spending cuts, £5 billion worth of savings from social security spending and roll out £5 billion worth of tax rises if it wants to balance the books by 2019/20.
Chancellor George Osborne has pledged to return the UK to a surplus by 2020, with the Office For Budget Responsibility forecast stating that the UK would have a budget surplus of £10.4 billion in 2019/20 and £11 billion the year after.
Labour Shadow Chancellor John McDonnell said: "The analysis from the IFS further underlines what a disaster it would be for the UK to risk a Tory Brexit under the Chancellor's recovery built on sand.
"We all know that the Tories want to use Britain leaving the EU as a pretext to slash workplace protections, but things could be even worse if a Tory Brexit led to even more austerity to try and meet George Osborne's self-imposed and self-defeating deficit targets."
Patrick Minford, co-chair of Economists for Brexit, said: "The IFS analysis acknowledges that the unilateral free trade approach recommended by Economists For Brexit would be the best option for the UK following an exit from the EU.
"The IFS comments that it is 'politically difficult' to embark on this WTO path. Yet this is entirely irrelevant for what is an purely economic argument."
Dr Gerard Lyons, fellow co-chair of Economists for Brexit, said: "The IFS's forecasts follow directly from the economic growth numbers. If one has a more upbeat view of the economic outlook with Brexit, as the Economists for Brexit group does, then naturally the budget numbers improve considerably.
"The analysis from the IFS highlights how vulnerable UK finances are to any economic setback, but we could easily suffer such a setback remaining in the EU."