The Government should commit now to replacing any subsidies from Brussels which might be lost by British companies, farmers or fishermen if the UK quits the European Union, a report has urged.
The report from thinktank Civitas warns of the "devastating" potential consequences of British exit on sectors ranging from agriculture and fishing to engineering and automobiles, as well as on regions such as Wales, which would be forced to cope with the loss of subsidies worth a total of £4.5 billion a year while their continental competitors continue to enjoy the largesse of Brussels.
Ministers must begin planning now to ensure that lost EU subsidies are matched by funding from Whitehall in the event that the UK votes to leave in the referendum promised by Prime Minister David Cameron for 2017, said the report, entitled Softening The Blow.
Jonathan Lindsell, the report's author and a Civitas research fellow, said: "The EU has tendrils that have infiltrated British life for 40 years, affecting our tax, our prices, our labour market and our export strength. Those in favour of 'Brexit' cannot simply trumpet the constitutional and economic benefits of leaving to drown out experts who foresee major impact in their particular fields.
"Even if you support exit in broad strokes, most accept that certain industries will be hit hard, depending on the nature of the exit agreement - or lack thereof. These individuals, sectors and regions cannot be ignored. It is important to take their fears seriously, so that the negative impact of 'Brexit' can be mitigated as far as possible."
Mr Lindsell warned that an abrupt loss of EU funds following Brexit could be devastating to the countryside and the economy if British farmers and fishermen are left to compete with still-subsidised Europeans.
He argued that the UK could raise "mirror funding" from the money saved from terminating EU budget contributions.
"Many British companies currently benefit from the EU's largesse in the form of subsidies or research and development grants," he said. "These include farmers, engineers, automotive developers, fishermen and the Welsh regions. The loss of these funds could be devastating as it would leave Britons competing with still-subsidised Europeans.
"Political hostility to the idea of subsidies must acknowledge that, given the competition, an abrupt funding loss could irreparably change the countryside and the economy. Using the money saved from terminating EU budget contributions, the UK could raise 'mirror funding' with long-term commitments to establish stability.
"These commitments could be based on cross-party agreement or an inflation-linked system, limited treaties to stay part of specific EU initiatives, or memoranda of understanding."
The report argued that the UK should also prepare for a rapid boost in its diplomatic corps to fill the gaps left by the loss of EU diplomats at a time when a post-EU Britain would swiftly have to form new alliances and trade deals.
"The Foreign Office will need a serious long-term boost in training, investment and recruitment, especially into languages, to make up for the absence of the various EU diplomatic bodies," wrote Mr Lindsell.
"Britain will need to be proactive in winning new alliances as well as consolidating relationships with current trading partners. The basis of trade deals is mutual advantage, and improved access to a market of 60 million people will always be attractive."