Dorset’s economy would be 3.2% or £1.3bn smaller, equivalent to a loss of £978 per person, if Britain leaves the EU in a Customs Union, according to a new report.

Local economies across the south west, including Dorset, would be some of the worst hit in England.

The independent study by the National Institute of Economic and Social Research (NIESR), predicts that the UK’s national economy would shrink by 3.1 per cent over the next decade, if the UK left under a Customs Union, compared to remaining in the EU.

That means that our national economy would take an £80bn pound hit, with everyone in the UK being an average of £800 a year worse off.

Regionally, the South West would fare particularly badly compared to other parts of England. The local economies of Dorset Gloucestershire, Wiltshire, Bristol, Bath and Somerset all among the top ten areas predicted to fare worst in England.

Government and Opposition Ministers are continuing to meet to try and find a possible compromise over Brexit, with a Customs Union Labour’s preferred option. Staying in the EU Customs Union would mean that the UK and the EU would agree not to impose any charges, or tariffs on each other’s goods.

The NIESR report, which was commissioned by the People’s Vote campaign, is the first independent study on the impact of a Customs Union, and assesses the impact of changes to trade, investment and immigration, as a result of leaving the EU.

It highlights how a Customs Union deal would dramatically impact on the spending decisions of a future Labour or Conservative government, cutting the amount of money available for public services by £13bn a year.

The study also warns that such a shortfall would need to be met by an increase in the basic rate of income tax of around 2.5p in the pound, higher public borrowing, or further public service cuts.

And it suggests that if the revenue shortfall was met by cuts in welfare or health care, then the biggest impact of such cuts is likely to be on areas that voted leave in 2016.

Garry Young, Director of Macromodelling and Forecasting for NIESR, said: “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 per cent of our economy. This inevitably will have economic costs, with widespread implications. We estimate that all regions will be adversely affected and that there will be fewer resources available to pay for public services.”