Britain's economy will be around 3% poorer over the long term if it leaves the European Union and retains a customs union with the bloc, the option favoured by the opposition Labour Party, academic forecasters predicted.

The National Institute of Economic and Social Research (NIESR) said the long-run loss after 10 years, compared to staying in the EU, would be equivalent to around 800 pounds per person per year.

"Leaving the EU for a customs union will make it more costly for the UK to trade with a large market on our doorstep, particularly in services which make up 80% of our economy," NIESR economist Garry Young said.

NIESR said overall gross domestic product 10 years after Brexit would be 3.1% lower in a customs union scenario than if Britain stayed in the EU, and tax revenues would fall by 2.9%. Lower immigration would limit the per capita reduction in GDP to 2.3%, equivalent to 800 pounds per head.