BREXIT would have a "substantial" impact on the UK and global economies while also sparking turmoil in world stock markets, the Organisation for Economic Co-operation and Development has warned.

Its warning came as George Osborne branded the Leave camp’s promise of an Australian-style points-based immigration system “fantasy politics”, saying it was unworkable and that it would increase the number of migrants coming to Britain.

The OECD slashed its forecasts for the UK economy as it said Brexit fears had already "undermined" growth.

It added quitting the Brussels bloc would have significant impact on growth across Europe and the rest of the world and trigger turbulence in financial markets.

In its latest economic outlook forecast, the global body said: "A decision to exit would result in considerable additional volatility in financial markets and an extended period of uncertainty about future policy developments, with substantial negative consequences for the United Kingdom, the European Union and the rest of the world."

The OECD cut its forecast for UK growth this year to 1.7 per cent, down from the 2.2 per cent predicted in February.

But this assumes a vote to remain in the EU and the OECD reiterated Brexit warnings for growth following a report in April, which said it would cost British workers the equivalent of a month's pay by the end of the decade.

The economic forum estimated in April that by 2020 GDP would be more than three per cent down on what it would have been if Britain had remained in the EU; the equivalent of £2,200 per household at today's prices.

Under the OECD's "central scenario", by 2030 the loss of GDP would have risen to more than five per cent; equivalent to a loss of £3,200 per household.

The group's latest gloomy assessment also underlines its fears over the global economy, which it said would fail to see growth pick up this year, remaining at three per cent, and only edge up slightly in 2017 to 3.3 per cent.

"Eight years after the financial crisis, the recovery remains disappointingly weak," it said, adding: "The forthcoming UK referendum on EU membership has already raised uncertainty and an exit would depress growth in Europe and elsewhere substantially."

In the UK, the OECD said referendum uncertainty had “led to a significant slowdown in economic activity".

It went on: "Business investment has contracted as businesses have put their spending decisions on hold and hiring intentions have weakened."

The international body echoed recent warnings from the Bank of England over the impact on the value of the pound as well as the potential for borrowing costs to rise amid a possible credit squeeze.

The OECD believes if Britons voted to remain in the EU, growth would pick up in the second half of the year and rise to two per cent in 2017.

The Bank of England recently claimed Brexit could tip the UK into a recession.

Policymakers at the Bank will give further insight on the UK economic outlook in this month's interest rate decision, which is due just a week before the June 23 vote.

Also due that week is a full Brexit analysis from the International Monetary Fund, which has provoked outrage among campaigners, given that the report is due potentially days away from the poll.

Responding to the OECD warning, David Cameron tweeted: “OECD is right to warn leaving Europe would have ‘negative consequences’ for our economy. That means lost jobs and higher prices.”

The chancellor said the report showed there would be "grim economic consequences of leaving the EU".

"The highly respected, independent OECD has significantly downgraded Britain's growth today because of uncertainty about the outcome of the referendum, and they are clear that is just a taste of worse to come if Britain leaves the EU," he added.

But John Longworth for Vote Leave said the most important finding of the report was the acknowledgement that the UK economy would continue to grow if Britain left the EU.

Nonetheless, he described the OECD report as “flawed,” saying it made assumptions, which had been roundly dismissed by senior economists.

“Instead of listening to partisan advisory bodies, let’s look at what businesses are actually telling us: that the costly red tape and regulations emanating from Brussels are constraining their ability to innovate and create jobs. If we Vote Leave on 23 June, we can change that,” he added.

Meantime, shadow chancellor John McDonnell said the OECD's move to downgrade UK growth in 2016 showed the “absolute failure of the Chancellor's economic policy".

He said: "With the OECD forecasting a dramatic shock to the whole economy from a Tory Brexit, it's clear we can't risk failed Tory economic policy any more.

"We need a serious commitment from this Government to invest in infrastructure and housing, backed up by a real industrial strategy to place the economy on a sound foundation and build the hi-tech, high-wage economy of the future," added Mr McDonnell.

Elsewhere, leading Outers Michael Gove and Boris Johnson, alongside Tory colleague Priti Patel, the business minister, and Labour Brexiteer Gisela Stuart, promised to create a "genuine Australian-style points-based immigration system" by the 2020 general election if voters backed Brexit.

The plan – which is also backed by Ukip - would end the automatic right of EU citizens to live and work in the UK with immigration instead based on skills and qualifications without discrimination on grounds of nationality.

The Brexiteers claimed some 77,000 jobseekers came to the UK from the EU last year under free movement rules, despite it being UK Government policy that people coming from Europe should have a job offer in place first.

They repeated their attack on the Prime Minister for promising to reduce net migration to the tens of thousands, again saying it was "corrosive of public trust".

But Mr Osborne dismissed the Australian-inspired proposal as "fantasy politics" next to the "reality check" of the OECD report.

The chancellor also defended Mr Cameron's renegotiated deal with the EU which means the Government would be able to apply a four-year "emergency brake" on in-work benefits for migrants.

On a visit to a logistics firm in Harlow, Essex, he said: "The Prime Minister has secured a deal that ends the something for nothing culture.

"But what a contrast today between the Leave campaign with their fantasy politics, unworkable proposals that will increase immigration, take us out of the single market and cost us jobs, and the reality check in the real world of the highly respected OECD which points out the grim economic future for the UK outside the EU.”