By David Milliken and William Schomberg
LONDON (Reuters) - Britain's government stepped up its warnings on Wednesday that a "no-deal" Brexit would hammer the economy, and pressed lawmakers to drop their opposition to Prime Minister Theresa May's plan, which it said would limit the damage.
Acknowledging that any Brexit option would be worse for the economy than staying in the European Union, the government said leaving the bloc without any agreement with Brussels would weigh heavily on growth at least into the 2030s.
Finance minister Philip Hammond said the plan that May agreed with EU leaders on Sunday "delivers an outcome that is very close to the economic benefits of remaining in".
In a scenario based on the Brexit plan that May announced in July, rather than Sunday's agreement, national output would be 2.1 percent smaller in just over 15 years' time than if Britain remained in the bloc, the government said.
If there was no deal, it would be 7.7 percent smaller.
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The report was immediately criticised by supporters of a more definitive break with Brussels as a "Project Fear" attempt to scare opponents of the plan.
But opponents of Brexit said it undermined promises by Brexit campaigners that leaving the EU would make Britain, and Britons, more prosperous.
"These figures show that the government's stated policy is to make our economy smaller and weaker," said David Lammy, a lawmaker from the opposition Labour Party who wants Britain to stay in the EU.
EFFECT OF IMMIGRATION
The government's forecasts assumed for the purposes of comparison that there would be no changes to migration rules, but that some non-tariff trade barriers would be introduced.
However, perceptions that immigration was too high under the EU's freedom of movement policy were a key reason why many Britons voted in 2016 to leave the EU.
Assuming there was zero net migration from the EU in the future, the hit to the economy would be bigger: 3.9 percent under May's deal, and 9.3 percent without a deal.
Wednesday's report said Britain's automotive and chemicals sectors faced the biggest potential losses from a no-deal Brexit - more than 20 percent of output.
The message from the government was likely to be echoed by the Bank of England, which was due to announce its own shorter-term forecasts for the economy at 1630 GMT.
Both Hammond and BoE Governor Mark Carney have stressed the importance of a transition period, as included in May's plan, to ease Britain out of its four-decade membership of the EU.
Carney said last week that the impact of leaving the bloc without a transition could be akin to the 1970s oil crisis for the world's fifth-biggest economy.
But there remains a real prospect of a disruptive Brexit, given the scale of opposition to May's plan in parliament, where it faces a vote on Dec. 11.
"NOT SCAREMONGERING"
The government's forecasts revived protests from supporters of a more definitive break from the EU, who had accused those who campaigned in 2016 to stay in the EU of ignoring the benefits and exaggerating the risks.
"I'm afraid we must be ready for Project Fear 2.0," said former Brexit minister David Davis, who quit in July in protest at May's plans. "The Treasury's forecasts in the past have almost never been right and have more often been dramatically wrong."
But Hammond told BBC television: "I am not trying to scare anybody and I reject the term 'scaremongering'."
Brexit supporters argue that May's deal will hurt Britain's economy over the long term by making it harder to strike trade deals with faster-growing countries and regions beyond Europe, and it is not clear that lawmakers will be swayed by the latest forecasts.
The BoE was due later to publish its assessment of the implications of different Brexit scenarios for interest rates and its oversight of the banking sector.
Carney has warned investors not to count on a cut to borrowing costs in the event of an economic shock, saying it could push up inflation sharply and damage growth.
(Editing by Guy Faulconbridge and Kevin Liffey)