Emmanuel Macron has warned Boris Johnson that Britain's economy will be downgraded and plunged into turmoil if the UK withholds the £39 billion Brexit divorce payment from Brussels.

Mr Johnson used his first interview of the Tory leadership campaign to warn that he would "retain" the divorce bill until he got a better deal with the EU.

He said in an interview with The Sunday Times that the money would be a "great lubricant" to persuade European nations to reopen talks on the Irish backstop and the terms of a future trade deal.

However, a source close to Mr Macron, the French President, said the failure to pay the divorce bill would represent the equivalent of a "sovereign debt default", such as that suffered by Argentina.

It would lead to a significant downgrade in the UK economy by ratings agencies causing the value of Government bonds to collapse, hitting savers and investors including insurance companies and pension funds.