The former boss of Liam Fox’s international trade department has warned that life outside the EU single market is like swapping a three-course meal for a packet of crisps.

In an intervention that could overshadow the international trade secretary’s speech on Tuesday, Sir Martin Donnelly said Britain faced a direct threat to its status as a leading service economy if it did not pursue close alignment with EU single market rules.

Donnelly, who will give a speech on the subject on Tuesday evening, hours after Fox’s own speech laying out the case for leaving the single market and customs union, told BBC Radio 4’s Today programme the UK risked being shut out entirely from its biggest market.

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“You’re giving up a three-course meal, the depth and intensity of our trade relationship across the European Union and partners now, for the promise of a packet of crisps in the future, if we manage to do trade deals in the future outside the EU which aren’t going to compensate for what we’re giving up,” he said.

Donnelly, who was permanent secretary at the international trade department until last year, said the EU was “the only functioning market for services in the world” and key to Britain’s prosperity as an advanced service economy.

“We risk losing that level playing field or being shut out entirely and we have got to look at how this really works in practice,” he said. “The challenge if we choose not to stay in the single market, is can we negotiate equal access in all those areas of services without agreeing to obey the same rules as everybody else?

“I’m afraid I think that’s not a negotiation, that is something for a fairy godmother. It’s not going to happen.”

Donnelly, a former Treasury adviser, said his advice could not be written off as pessimism from a Europhile mandarin, as ministers have attempted to do in the past.

“We really have to focus on the realities of Brexit and the choices we’ve got ahead of us. If we leave the customs union and the single market, we are taking away the access that we’ve got to 60% of our trade, nearly half with the EU and the other 12% through EU preferential trade deals.”

In his speech later, Donnelly is expected to pour scorn on the phrase “frictionless trade”, which ministers have said they want to have with the EU and third countries. “Having our cake and eating it is not an option in the real world; ‘frictionless trade’ is a phrase without legal content,” he will say, according to Politico.

“Given the negative consequences of leaving, and the lack of any significant offsetting advantages, I believe it is likely the UK will seek to return to full membership of the EU single market in due course. But significant damage to employment, the structure of the economy and the competitiveness of UK firms can be expected in the meantime.”

In his speech at lunchtime, Fox will say remaining in a customs union with the EU post-Brexit would leave Britain in a worse position than now, calling the prospect “a sellout of Britain’s national interests”.

Flexibility will be key to any future trade policy, he will say. “We will consider multi-country alliances of the like-minded right down to bilateral arrangements,” he will say.

“To do this, we need the ability to exercise a fully independent trade policy.” Agreeing to remain in a customs union with the EU would make Britain an unattractive trading partner and prevent future trade deals with non-EU nations.

“As rule takers, without any say in how the rules were made, we would be in a worse position than we are today. It would be a complete sellout of Britain’s national interests.”

The speech follows confirmation by the Labour leader, Jeremy Corbyn, that it would seek “a new, comprehensive UK-EU customs union” after Brexit, opening a path for Labour to formally back a joint backbench Labour-Tory amendment to the forthcoming trade bill on the customs union.

The foreign secretary, Boris Johnson, said Donnelly’s words were a “counsel of despair” and did not take into account the future demand for British services outside the EU.

“I dissent very strongly from what he says. If you look at the real growth opportunities for this country, they are not in the EU … The great potential is in services and that is one of the things we have got to emphasise, data, banking, financial services. To say the world has exhausted its appetite for British-led services is absolutely a counsel of despair, the market is insatiable. It’s our capacity to supply that is the issue.”