The vote to leave the EU has cost Britain "tens of billions of pounds" in lost economic activity, the governor of the Bank of England has said.
Mark Carney said investment in the UK had still to recover in the way that it had done in the rest of the global economy due to the "Brexit effect".
However, he said the impact was likely to be "short term" and there was the prospect of a "conscious recoupling" with the international economy in the year ahead.
"The economy is about a percentage point less in size than we expected before the vote at this point in time - by the end of the year, probably two percentage points," he told BBC Radio 4’s Today programme.
"What it works it out to is tens of billions of pounds of lower economic activity. The question is how do we make that up over time by growing above potential."
He said, however, that there was now the potential for growth to pick up as the shape of any Brexit deal became clearer and firms regained the confidence to invest.
"What is happening in the UK is effectively the Brexit effect in the short term. And I would underscore ’in the short term’," he said.
"The world economy is accelerating and we haven’t seen that yet. But there is the prospect this year, as there is greater clarity with the relationship with Europe and subsequently with the rest of the world, for a conscious recoupling of the UK economy with the global economy."
Mr Carney said the deeper the relationship with the EU after Brexit, the better it would be for the British economy.
"The deeper the relationship with Europe, the deeper the relationship with the rest of the world - and the two are obviously connected, it is a complicated set of negotiations - the better it is going to be over time for the UK economy," he said.
However, whatever the eventual outcome of the negotiations, he said the Bank had taken steps to ensure that the UK’s financial sector was well-placed to cope.
"What we have been doing is to make sure that we are in a position as the UK, with this huge financial sector, that we can withstand any outcome and we can take advantage of any outcome," he said.
"The Government doesn’t have to worry about the impact on the financial sector because it will be able to withstand and support the economy."