Chancellor George Osborne has warned that at least half a million jobs would be lost within 2 years of a vote to leave the European Union.

Speaking during a visit to B&Q headquarters in Hampshire, with Prime Minister David Cameron, he said the latest Treasury analysis shows an immediate impact of a Brexit on the economy, jobs and house prices.

"The conclusion is all would be hit", Mr Osborne said.

"Households and businesses will know that Britain is going to be poorer in the future so they'll start cutting back on spending now and avoiding big investments and that has an effect on the economy now."

"Leaving the EU creates a huge amount of uncertainty," he added.

Stack all these things together; the fact we'll be heading towards a poorer Britain, the fact we'll be surrounded by uncertainty, the fact the financial system will be volatile, it builds up to a profound, economic shock if Britain leaves the EU.

Chancellor George Osborne

The Treasury's Analysis

Treasury officials used two models in its analysis to look at the possible effects on the UK:

  • A 'shock' scenario, which the Treasury says uses cautious assumptions and links the size of the transition effect to the central estimate of the UK adopting a negotiated bilateral agreement with the EU

  • A 'severe shock' scenario, which is linked to the estimate of Britain leaving the Single Market and defaulting to membership of the World Trade Organisation.

The Treasury analysis suggests a Brexit would lead to a 'poorer Britain'. Credit: PA
  • Under the severe shock scenario, average real wages would fall by 4%, and they would drop by 2.8% under the shock case.

  • Sterling would fall by 15% under a severe shock, and 12% if damage was limited to a shock scenario.

  • GDP would drop by either 3.6%, or 6%, under the scenarios.

The key figures released by the Treasury based on the two scenarios. Credit: Treasury

Brexit 'would push Britain into a recession'

Mr Osborne said the result of the Treasury's analysis "were clear, a vote to leave would push our economy into a recession".

"Real wages will fall by almost 3% in the first two years compared to where they'd be if we remain in the EU, " he added.

"To put that in perspective - that's a pay cut worth almost £800 a year to someone working full-time on the average wage.

"Within two years, at least half a million jobs would be lost."

Cameron warns of "DIY recession"

The prime minister also warned that leaving the EU would be the "self-destruct option" for Britain.

"This could be, for the first time in history, a recession brought on ourselves. As I stand here in B&Q, it would be a DIY recession."

After all the pain, all the sacrifice by the British people, why would we want to put it at risk again? It would be like surviving a fall and then running straight back to the cliff-edge. It is the self-destruct option.

David Cameron

Mr Cameron added that the Treasury predictions were not a "radical" surprise and denied that it was a "DIY forecast".

"This comes after very similar warnings from a number of organisations so the Treasury is not today saying something radical or unexpected.

Former Conservative chancellor, Lord Lawson, who is a member of the Vote Leave campaign, said the Treasury's analysis was "scaremongering".

Lord Lawson said the analysis was 'the Government’s unprincipled scaremongering;. Credit: PA

"The Treasury has enough trouble with forecasts even when they are trying to get them right.

"This time they have simply assumed a disaster in order to scare the pants off the British people," he added.