A no-deal Brexit would result in an instant shock to the UK economy, the governor of the Bank of England, Mark Carney, has warned.
Items such as petrol and food would become more expensive if the UK leaves the EU without an agreement, he said.
He predicted the value of the pound would fall in response to what he described as a “real economic shock”.
“The change in trading relationship means that real incomes will be lower,” he told the BBC’s Today programme.
But he rejected claims that the Bank’s decision to cut growth forecasts was gloomy, after former Tory leader Iain Duncan Smith accused him of reviving project fear.
Mr Carney said “you’re hard pressed” to describe the Bank’s forecasts in that way.
On Thursday, the Bank said the economy was expected to grow by 1.3% this year, lower than its earlier projection of 1.5%, if the UK leaves the EU with a deal.
It did not say what it expected to happen in the case of a no-deal Brexit.