Britain will be forced to accept a Canada-style trade deal with EU, leaked document reveals

Memo is a blow for the British Government, which has boasted about the potential for a bespoke arrangement

European Union's chief Brexit negotiator Michel Barnier gestures during a news conference (Reuters)

Britain will be forced to accept a Canada-style post-Brexit trade deal with the EU that is vastly inferior to the current arrangement and which imposes new tariffs on imports and exports of food, a leaked document reveals.

The memo from chief Brexit negotiator Michel Barnier will come as a blow to Theresa May and her Cabinet who have repeatedly spoken of their desire to construct a bespoke deal between the UK and the remaining 27 EU members once ties are cut.

Ms May said in her Florence speech that replicating the Canada-EU deal would “represent such a restriction on our mutual market access that it would benefit neither of our economies”.

But the document, said by Politico to have been provided to Mr Barnier for a “preparatory discussion” on the “framework for the future relationship”, suggests London will struggle to achieve its aim of tariff-free and frictionless trade with the bloc.

It states that the UK’s rejection of the European Court of Justice and issues around “regulatory autonomy” mean it will not be “compatible” as a close trade partner.

The document also suggests London’s status as a financial centre could be further at risk, as it rules out “direct branching in sectors like financial services”, Politico reported.

The document adds that the future deal would see only “limited EU commitments to allow cross border provision of services”.

Banking giant JP Morgan has called for a free trade agreement with the EU to cover the financial services.

Sally Dewar, the firm’s international head of regulatory affairs, said a “novel, unique, new style of free trade agreement that would go beyond what’s been previously negotiated in the past” was needed.

It comes as the EU warns Ms May that trade talks beginning next month is "not a given".

Brussels is pushing for more information from her on key issues including the divorce bill the UK will pay to the EU.

The Prime Minister will hold talks with European Council president Donald Tusk and Ireland's Prime Minister Leo Varadkar in the margins of a major European summit in Gothenburg on Friday.

EU sources have suggested that Mr Tusk will tell her that although internal preparations had begun on preparing for the second phase of Brexit talks, covering a transitional deal and the future relationship the UK will have with Brussels, it could not be taken for granted that leaders will agree to move on to formal talks.

Ms May hopes December's European Council summit will see leaders give the green light to talks on a post-Brexit trade deal.

But a Brussels source told Press Association: "Mr Tusk will inform Mrs May that such a positive scenario is not a given, it will require more work and that time is short.

"And he will ask Ms May how the UK plans to progress on the three key issues for phase one."