Britain caved in to the EU on the opening day of the Brexit talks, when it agreed to settle its “divorce” before trying to negotiate a future trade deal.

In a major defeat, Brexit Secretary David Davis was forced to drop his central demand for the two strands of the negotiations to be staged in parallel, within hours of arriving in Brussels.

Last month, Mr Davis vowed to wage the “row of the summer” to secure immediate talks on a free trade agreement – predicting an early collapse if the EU refused to give way.

But both sides have now agreed to set up working groups on EU citizens’ rights, the size of Britain’s “divorce bill” and borders – but not, crucially, future trade.

At a press conference, Mr Davis was forced to concede that the talks would only move on to trade when the EU decided “enough progress” had been made on its three priorities. Asked if the “weakness of your negotiating position” had been exposed, Mr Davis put on a brave face, claiming: “It’s not when it starts but how it finishes that matters.”

Ahead of the opening day, the UK had also promised to unveil a “generous offer” to end the row over the future rights of three million EU citizens in the UK and 1.2 million British ex-pats in the EU.

However, Mr Davis said the offer would not be published until next Monday, after Theresa May briefs EU leaders on her intentions at a summit at the end of this week. Further rows are expected over the cut-off date for granting rights and whether EU citizens can bring in relatives in perpetuity, including from third countries.

Significantly, Mr Davis said he would tell Labour and other parties about the Government’s plans in advance – reflecting its weak position, with no Commons majority.

Speaking in Brussels, Michel Barnier, the EU's chief Brexit negotiator, made clear where the power lay in the talks when he said Britain had bowed to the EU’s demands for two phases.

In pictures: European parliament Brexit discussions Show all 12 1 /12 In pictures: European parliament Brexit discussions In pictures: European parliament Brexit discussions European commission member in charge of Brexit negotiations with Britain, French Michel Barnier listens at the President of the European Commission Jean-Claude Juncker speaking at the European Parliament in Strasbourg Getty Images In pictures: European parliament Brexit discussions Frank-Walter Steinmeier, President of the Federal Republic of Germany, delivers his speech at the European Parliament in Strasbourg EPA In pictures: European parliament Brexit discussions European Union's chief Brexit negotiator Guy Verhofstadt, President of the Group of the Alliance of Liberals and Democrats for Europe (ALDE), addresses the European Parliament during a debate on Brexit priorities and the upcomming talks on the UK's withdrawal from the EU Reuters In pictures: European parliament Brexit discussions Michel Barnier, European Chief Negotiator for Brexit reacts during a meeting at the European Parliament in Strasbourg EPA In pictures: European parliament Brexit discussions Member of the European Parliament and former leader of the anti-EU UK Independence Party (UKIP) Nigel Farage wears socks with Union Jack flag at the European Parliament in Strasbourg Getty Images In pictures: European parliament Brexit discussions Nigel Farage, United Kingdom Independence Party (UKIP) member and MEP, addresses the European Parliament during a debate on Brexit priorities and the upcoming talks on the UK's withdrawal from the EU Reuters In pictures: European parliament Brexit discussions European commission member in charge of Brexit negotiations with Britain, French Michel Barnier gestures during speeches at the European Parliament in Strasbourg Getty In pictures: European parliament Brexit discussions The President of the European Commission Jean-Claude Juncker (L) speaks with European commission member in charge of Brexit negotiations with Britain, French Michel Barnier at the European Parliament in Strasbourg Getty In pictures: European parliament Brexit discussions European Union's chief Brexit negotiator Guy Verhofstadt, President of the Group of the Alliance of Liberals and Democrats for Europe (ALDE), addresses the European Parliament during a debate on Brexit priorities and the upcomming talks on the UK's withdrawal from the EU Reuters In pictures: European parliament Brexit discussions Member of the European Parliament and former leader of the anti-EU UK Independence Party (UKIP) Nigel Farage gestures during speeches at the European Parliament in Strasbourg, eastern France, on April 5, 2017. The European Parliament will on April 5 lay down its "red lines" for negotiations over a Brexit deal, on which the assembly will have the final say in two years' time. / AFP PHOTO / Sebastien BozonSEBASTIEN BOZON/AFP/Getty Images Getty In pictures: European parliament Brexit discussions German president Frank-Walter Steinmeier delivers a speech during a plenary session at the European Parliament in Strasbourg Getty In pictures: European parliament Brexit discussions The European Parliament in Strasbourg, eastern France Getty Images

“We have to commit ourselves now mutually to guarantee rights to citizens on either side of the Channel so they can continue their lives as in the past,” Mr Barnier said.

“We have to clear the accounts and we have to honour our mutual financial commitments. We also have to find solutions to maintaining all the commitments of the Good Friday Agreement. “It is by lifting uncertainties around these issues that we will lay the foundation and create the climate of trust which will enable us to build a new partnership.”

Mr Barnier was asked if – given the political uncertainty at Westminster – he expected Mr Davis to remain in his post for the duration of the negotiations. “I am working with the British Government and its official representative David Davis. That’s what I can say, from my part,” he replied.

And, turning Ms May’s “no deal is better than a bad deal” threat against her, Mr Barnier added: “A fair deal is possible and far better than no deal. That is what I said to David today.”

Tim Farron, the Liberal Democrat leader, claimed Mr Davis had been “humiliated”, saying: “One day in, he has capitulated. The man is a joker. Despite the government’s posturing, the EU was clear today it has not made a single concession to David Davis.”