Britain and European Union agree terms of reference and timetable for Brexit talks

European Commission official Mr Barnier warned the United Kingdom faced “substantial” consequences as a result of Brexit but insisted it was “not about punishment” or revenge. He noted the European Union wants to discuss divorce terms before moving on to the shape of its future relations with Britain. European Union diplomats hope this first meeting, and a Brussels summit on Thursday and Friday where May will encounter – but not negotiate with – fellow European Union leaders, can improve the atmosphere after some spiky exchanges.

The chancellor said he would reject any deal “designed to destroy us”.

In a sign of the progress that has been made, Mr Davis said the Prime Minister would brief fellow European Union leaders at a summit on Thursday on the UK’s approach to the rights of expatriate citizens, which will be set out in detail in a paper on Monday.

With Mrs May still hammering out the details of a post-election deal to stay in power with the support of a small Northern Irish party, there are fears of a disorderly exit that would weaken the West, imperil Britain’s US$2.5 trillion (S$3.5 trillion) economy and undermine London’s position as the only financial centre to rival NY.

Philip Hammond has warned failing to secure a Brexit deal would be “very, very bad” for Britain ahead of the start of exit talks in Brussels on Monday. An early election this month, in which British Prime Minister Theresa May lost her Conservative majority in parliament, only added to the problems.

The European Commission has made it clear that it wants the first talks to focus on the status of expats and this, along with other issues such as the so called “divorce bill” and the border between Ireland and Northern Ireland should be concluded before talks begin in a trade deal.

Mr Davis had previously said not settling both elements simultaneously would be the row of the summer.

Some of her ministers want to refashion her strategy toward protecting trade with Britain’s biggest market rather than continue to aim for her original goal of winning control of immigration and law-making.

After the initial shock of last year’s Brexit vote and faced with rising anti-EU sentiment, the bloc at 27 appears to have steadied in recent months and got a real boost with the election of new French President Emmanuel Macron in May. Britain, he said, would seek to leave both the single market and the customs union and forge a separate trading agreement.

Brussels has vowed it will not begin trade talks until it is paid – but Theresa May has said they must start immediately and occur at the same time.

With a further million British expatriates in the EU, May too wants a deal on citizens’ rights, though the two sides are some way apart.

“I hope today we can identify priorities and a timetable that would allow me to report to the European Council (summit) later this week that we had a constructive opening of negotiations”, added the former European commissioner and French foreign minister, speaking against a backdrop of British and EU flags.

“No deal would be a very, very bad outcome for Britain, but there is a possible worse outcome and that is a deal that is deliberately structured to suck the lifeblood out of our economy over a period of time”.