EU Brexit negotiators were left “flabbergasted” after their British counterparts launched a legal deconstruction of the so-called “Brexit bill” Wednesday as the Brussels talks headed for an increasingly acrimonious impasse, EU sources have told The Telegraph.

British negotiators spent three hours launching a painstaking, line-by-line rebuttal of the EU’s demands for €100bn divorce settlement to the barely concealed fury of EU negotiators.

"There was total amazement,” the EU source said, “Everyone was completely flabbergasted that this young man from Whitehall was saying that the EU's preparation on the financial settlement was 'inadequate'. It did not go down well."

The “intense” exchanges were the first time the two sides have butted heads over the details of the divorce bill and sets up what is expected to be a frosty joint press conference on Thursday between David Davis, the Brexit Secretary and Michel Barnier, the EU chief negotiator.

Both men failed to hide their differences when talks opened on Monday, with Mr Davis demanding more “flexibility” from the EU, while Mr Barnier demanded an end to “ambiguity” from the British side.

In a sign of open frustration on both sides, Mr Barnier again accused the UK of failing to specify its positions. "To be flexible you need two points, our point and their point," he said. "We need to know their position and then I can be flexible."

British negotiators have consistently refused to say what the UK is prepared to pay for Brexit, but have sought to turn the tables on the EU side by attacking the legal basis for their demands.

Britain's Brexit Secretary Davis speaks to media in Brussels credit: REUTERS

In an 11-page presentation containing 23 slides and 47 paragraphs of dense text, the British negotiators argued that the European Commission’s 4-page position paper on the financial settlement provided scant basis for a settlement.

“The UK is not convinced that the European Commission's paper [on the financial settlement] is satisfactory,” said a source with knowledge of the UK strategy, “ "Nobody would write a cheque on the basis of the Commission's paper."

Among the slides was a reference to the key part of Article 50 which says a member state’s withdrawal from the EU should be agreed with reference to the “future relationship”.

The EU side is currently refusing to discuss a future EU-UK relationship until there is “sufficient progress” on the issues of the financial settlement, citizens’ rights and the Northern Irish border - all issues the UK says cannot be settled without reference to the future deal.

“It's difficult to negotiate with people who have perhaps not been given the flexibility to negotiate," added the source, echoing British concerns that the EU has created an unworkable straitjacket for the talks.

Other areas of the talks are understood to have made scant progress, with the EU refusing British requests to continue the EHIC health insurance scheme for British tourists after Brexit and threatening measures that could instantly clog industry supply chains on both sides of the Channel.

With the impasse over the talks deepening, Mr Barnier and other top EU officials have warned that the chances of Britain progressing onto future relationship talks in October, as originally planned, are now receding.

Guy Verhofstadt, the European parliament's chief Brexit negotiator, made the same threat Wednesday and was accused of going "way beyond his pay grade" after he suggested that the talks could grind to a halt in October.

MEP Guy Verhofstadt credit: AP

In an address to MEPs, Mr Verhofstadt said he was concerned by the pace of the negotiations, which he blamed on the UK's reluctance to offer "further clarity" on the terms of the so-called Brexit divorce bill.

"If it goes slowly, as is the case at the moment, it will be very difficult to say there is sufficient progress in October," said former Belgian prime minister.

Syed Kamall, Tory MEP and Co-chairman of the European Conservatives and Reformists Group, said Mr Verhofstadt's remarks went "way beyond his pay grade."

"Mr Verhofstadt's role as Brexit co-ordinator is to act as a link between the European Parliament and the Commission. It is not his job to try and impose a position on MEPs," he said.

Theresa May, on a trip to Japan, told the EU it was in everyone’s mutual interest to get on with trade talks, adding that “significant discussions” had to take place before the size of the so-called “divorce bill” could be agreed.

“I’ve always said a good trade deal is not just about the UK, it’s about what’s good for businesses in the 27 remaining states in the European Union as well. It’s in all our interests to move onto those trade talks and to get that good deal,” she said.

However William Hague, the former Conservative leader, warned that Mrs May’s disastrous election performance had weakened Britain’s hand in the talks.

“Britain will get a worse deal as a result of the election. I think there is no question about that,” he told the BBC.