Britain is facing a £1.7billion fine from the EU for allowing criminal gangs to flood European black markets with illegal Chinese goods in a move that will add to tensions surrounding Brexit negotiations.

The European anti-fraud office, known as Olaf, has accused British customs officials failing crack down on gangs using fake invoices to make false claims about the value of shoes and goods.

It claimed that France, Germany, Spain and Italy have lost a combined £2.7billion in VAT revenues because of the failures of British customs officials.

Downing Street said that it "does not recognise" the figures, which is described as an estimate rather than a bill, and said that the UK takes all allegations of fraud "seriously".