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The UK is set to leave the European Union in March 2019 Daniel Leal-Olivas/AFP

The UK faces economic losses of around $140bn (£105bn) in the first decade after Brexit if it fails to secure a free trade deal with the European Union, a US think tank has warned.

The Rand Corporation said Britain would lose about 5% of its gross domestic product over the 10-year period if it leaves the EU with no deal and operates under World Trade Organization (WTO) rules.

The think tank said the UK would face significantly increased non-tariff barriers under WTO rules, harming the ability of British businesses to sell goods and services to EU countries.

The EU would also face losses under a "no deal" Brexit scenario, but the effect would be relatively minor at 0.7% GDP lost over the span of a decade.

"The analysis clearly shows that the UK will be economically worse off outside of the EU under most trade scenarios. The key question for the UK is how much worse off," said Charles Ries, vice president international at Rand.

"It is in the best interests of the UK, and to a lesser extent the EU, to achieve some sort of open trading and investment relationship post Brexit."

Rand says the UK is destined to suffer economic losses no matter what trade agreement it emerges with, compared to if it had continued to stay in the EU.

It said the trade deal that would offer the most benefit for Britain would be a trilateral UK-EU-US free trade agreement, although the think tank acknowledged that such a deal was highly unlikely in the current political climate.

"Based on our insights, it is in the best interests of the UK to cooperate with its EU partners to find a new relationship with Europe," Ries explained.

"This would preserve economic benefits for both sides, but also give the UK the freedom from EU rules which it seeks."

However, Ries warned that Brussels may adopt a "zero-sum game" and not give too much away to the UK to preserve the strength of the EU.

A separate analysis by accountants EY predicted that London would lose 10,500 jobs on the first day after Brexit, with Dublin and Frankfurt among the cities set to benefit from the UK capital's loss.