Businesses would be likely to cancel their investment projects in Britain under a no-deal Brexit, paving the way for weaker economic growth in future, a deputy governor of the Bank of England has warned.

Ben Broadbent, a senior policymaker at Threadneedle Street as the deputy governor for monetary policy, said that business investment plans that had been put on ice amid the political uncertainty over Brexit would probably be torn up altogether should the UK leave without a deal.

In a speech, he said: “Actively choosing the very thing that businesses seem to fear the most is more likely to mean that investment projects that have so far been postponed will instead be cancelled for good.”

Research from the Bank’s network of regional agents has found that UK firms believe a no-deal departure with no transition period would have the worst impact on the UK economy, he added.

Broadbent’s warning comes as Conservative leadership contenders jockey to replace Theresa May as prime minister with MPs on the right of the party pushing for Britain to walk away from talks with Brussels without a deal. It also comes as public support in recent polls has risen for Nigel Farage’s Brexit party – which also promotes no-deal Brexit.

Boris Johnson and Dominic Raab, who have both said they are willing to back a no-deal Brexit, have emerged as favourites among the Tory membership. Johnson is the frontrunner.

Philip Hammond, the chancellor, has previously said that parliament passing a deal would lift the cloud of uncertainty facing the economy and create a “deal dividend” as firms reinstate investments – a claim that has been challenged by some economists.

Broadbent said that business investment fell in every quarter of 2018, which, outside of recessions, was the longest decline on record. “This is remarkable at a time when the economy has been growing,” he said.

Considered among the potential candidates to replace Mark Carney when the Bank’s governor leaves early next year, Broadbent said business investment had suffered as firms repeatedly expected Brexit to be resolved sooner.

He said: “A repeated series of cliff edges, each of which is expected to be decisive but in reality just gives way to the next cliff, is more damaging for investment than if it had been clear at the outset that the process will take time.

“This doesn’t mean that resolving things soon, by any means necessary, is the better course.”