LABOUR MPs should "hold firm" and vote down a Brexit deal Theresa May brings back to Parliament, Tony Blair has said.

The Prime Minister hopes to win over dozens of wavering Labour MPs because she may have to depend on their votes due to a potential revolt in the Tory ranks.

But Mr Blair suggested Labour should instead seek to create a "blockage" at Westminster which could result in the British public being given a final "definitive" say on the outcome of the Brexit process.

Mr Blair's comments, at an event in London, came as research commissioned by his Institute for Global Change indicated the economy would suffer a major hit as a result of the service sector being outside the single market, as envisaged by Mrs May's Chequers plan.

Labour seems set to oppose any deal based on Chequers, with the hope of forcing a general election or, failing that, keeping all options including a referendum on the table.

Mr Blair said the Conservatives would be "suicidal" to have a Brexit election but suggested they may back a so-called People's Vote.

He said Mrs May was caught in a dilemma between a soft Brexit which would disappoint Leave supporters or a more decisive break from Brussels which would hit the economy.

In a message to Labour MPs he said: "I would advise them to hold firm against Brexit because either of these choices are unpalatable.

"If there is no way round this dilemma then you are going to come back with a deal that is going to be unpalatable for one of two reasons - either because people will say 'what on earth is the point of having Brexit if you are still bound by the rules?'.

"On the other hand, if you come back with what is essentially a Canada-style free-trade agreement that is going to do immense damage because you are going to have to recreate and restructure your relationships."

He acknowledged the prospect of voting down a deal would cause even greater uncertainty and was "really difficult".

But he added: "The alternatives are all worse because if you do get to a blockage in Parliament, that's what opens up the possibility of going back to the people.

"There's a huge debate about this, whether it's right or wrong. My view is this only happens if there's a blockage in Parliament, but if there is blockage in Parliament it's a very simple argument."

He said that "this referendum would be definitive, in my view", explaining that unlike in 2016 the public and politicians would have had more than two years' experience of grappling with the issues.

It was an "open question" what would be on the ballot paper, but abandoning Brexit altogether and remaining in the European Union should be available as a choice - and he suggested Brussels would make a "much more attractive offer" to the UK on terms for staying in.

Mr Blair suggested Labour MPs worried about their leave-supporting voters should be saying "Brexit is not going to solve your problems" and instead offer alternative solutions.

His institute published analysis by the National Institute of Economic and Social Research (NIESR) indicating the impact Brexit could have on the UK's prized service sector.

Crashing out and trading on World Trade Organisation (WTO) terms would see GDP 4.91% lower in 12 years' time than if Britain remained in the customs union and single market.

Even Theresa May's so-called Chequers deal would see GDP take a 4.13% hit, the research suggested.

Mr Blair said: "The report shows the economic impact of the exclusion from the Single Market just for services. Using the NIESR baseline we calculate that this will amount to £17 billion in lost revenue by 2030, or double Britain's present contribution to the EU.

"Many people may think that though the short term impact of Brexit will be severe, we will swiftly recover. This analysis demonstrates that this is not the case.

"The pain will go on for a long time and will only be reduced by radical measures of deregulation and cost saving to improve Britain's competitive advantage with Europe, which run in precisely the opposite direction of the policies now advocated by both main political parties."