The impact of Brexit on the UK economy will be worse than that caused by the Covid pandemic, according to the chairman of the Office for Budget Responsibility (OBR).

Richard Hughes said the OBR had assumed leaving the European Union would “reduce our long run GDP by around 4 per cent”. 

He told the BBC: “We think that the effect of the pandemic will reduce that (GDP) output by a further 2 per cent.

“In the long term it is the case that Brexit has a bigger impact than the pandemic”, Mr Hughes said, hours after the OBR revised its earlier prediction for this year’s VAT receipts following higher-than-expected inflation. 

The fiscal watchdog said it expected inflation to reach 4.4 per cent while warning it could hit “the highest rate seen in the UK for three decades”.

The Treasury will collect £4 billion more in VAT this year than it expected because of the rising cost of living, the OBR forecast says.

Inflation is now expected to reach four per cent in 2022, the body said, before falling to 2.6 per cent in 2023 and 2.1 per cent in 2024.

The Bank of England’s target rate of inflation is 2 per cent but it had been running below that level between mid-2019 and earlier this year. 

The rising cost of fuel and other goods created by the UK’s HGV crisis has brought the current level to an average of 3.1 per cent over the past 12 months.