Downing Street rejects threat of fines from Brussels if it breaks the terms of a future trade deal with the EU Number 10 insists it will not align with the EU after it leaves the bloc

Downing Street has rejected threats from Brussels that the UK will face fines or lose preferential access to the European market if it breaks the terms of a future trade agreement with the EU.

The European Commission has drawn up plans that will see trade and its wider cooperation with the UK governed by a strict set of rules.

The 27 member states, particularly France and Germany, are pushing for Britain to remain closely aligned with the EU in any future deal, something Boris Johnson has repeatedly ruled out.

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As part of its proposals, the Commission has set out dispute settlement procedures for any future agreement that could lead to financial sanctions imposed on the UK or the suspension of the deal.

Canada-style

The plans were presented to diplomats of the EU27 countries during a meeting in Brussels on Monday, according to the Financial Times.

It signals that the talks between the Commission and Westminster could start on less than favourable terms.

Number 10 dismissed the suggestion of sanctions, stating it wanted a Canada-style free trade arrangement, which has a dispute resolution mechanism but without financial sanctions.

The Prime Minister’s official spokesman said: “We’ve not even started negotiations with the EU on our future relationship yet, but we’re clear that we want a Canada-style free-trade agreement. The PM has set out that our future UK-EU relationship should be based on friendly co-operation.”

A senior Government source added: “They should be thinking in terms of the Canada deal – the EU was fine with those terms then.”

EU member states are increasingly concerned that the UK could become an economic competitor on its doorstep and has insisted that the UK should sign up to a “level playing field” of common rules and regulations.

Brussels officials briefed diplomats last week, stating the talks would breakdown if the UK refused to sign up to the EU’s rules in return for a zero tariff, zero quota trade deal.

The Commission also wants to keep the UK in “dynamic alignment” with its regulations on areas such as environmental protections, workers’ rights and animal welfare standards.

No ruletaker

But speaking before the finance summit in Brussels yesterday, chancellor Sajid Javid reiterated the Government’s intention to diverge from EU rules, stating Britain would “not be ruletakers”.

“At the same time, of course, we want a deep, comprehensive free trade agreement, and that’s what we are working on,” he added.

When asked if this would damage business in the UK, the Chancellor replied: “No, not at all. We look forward with confidence as we strike that new free trade agreement with our European friends, as we strike new free trade agreements across the world, it will be a very important time for British business. And I can see a British economy that continues to go from strength to strength.”

Despite his confidence, Mr Javid’s comments have triggered widespread alarm across the business sector, with the Institute of Directors now urging the UK to publish its negotiating targets as soon as possible.

UK officials said on Monday that the Prime Minister is likely to set out his plans for a trade deal with both the EU and the rest of the world, including the US, at the beginning of February.