WALES could lose £500m a year after the UK leaves the European Union a report as warned.

Research released by the Institute for Fiscal Studies (IFS) yesterday, Wednesday, showed the Welsh Government’s funding from the Westminster could fall by 3.2 per cent in real terms over the next three years, with the largest cuts to come in 2018 and 2019.

The report also warned council tax bills in Wales may have to increase by around four per cent a year over the next three years to make up funding shortfalls.

Research economist at the IFS Polly Simpson said the Welsh Government faced “difficult budgetary trade-offs”.

"Protecting such large areas of spending as health, social care and education would require substantial cuts to other areas of spending that have often already had to absorb seven years of real-terms cuts," she said.

The report has been published as part of the Wales Public Services 2015 programme hosted by Cardiff Business School.

The programme’s director Michael Trickey said he believed tough times for public services in Wales were far from over.

“Austerity still has some way to run and further cuts seem unavoidable,” he said.

"This will intensify the pressure on public services to increase the scale of change and mitigate the impact on communities."

A Welsh Government spokesman said: “We have worked hard to protect public services in Wales from the full impact of these cuts.”

He added the government was currently developing its draft budget for the 2017-2018 financial year, which will be published in October, and as part of this was looking at the long-term outlook for Wales’ finances.

“We will be considering how we can use the tools available to us to deliver the best outcome for Welsh residents and Welsh public services in these uncertain times,” he said.

And South Wales East AM and Plaid Cymru’s shadow external affairs secretary Steffan Lewis claimed the figures showed how the Leave campaign had misled voters ahead of June’s referendum.

"The referendum was not a vote to centralise power in Westminster, nor to cut the Welsh budget,” he said. “Had it been, the outcome may well have been very different.

"A cut of £500m a year, as anticipated by the IFS, would signal a significant loss to the Welsh economy, on top of an already squeezed Welsh budget.”

To view the full report visit ifs.org.uk.