The Office for Budget Responsibility also said the British current account deficit remained large and was likely to fall only slowly, leaving the country vulnerable to a drop in investor confidence if there were a disorderly Brexit.

The economy was growing faster than its long-run potential, adding to inflation pressure, the OBR added.

"On the basis of the latest information, we judge that the economy was operating slightly above potential in the fourth quarter of 2017 – by 0.3 percent. This is 0.2 percentage points higher than we judged in November," it said.

($1 = 0.7160 pounds)

(Reporting by David Milliken; editing by David Stamp)