Dominic Raab told peers it would be “peculiar” for Britain to pay £40 billion if no trade deal was agreed Ben Stansall/Getty Images

The UK will withhold part of its Brexit divorce bill if it leaves the EU without a deal, Dominic Raab has warned.

The Brexit secretary said it would be “peculiar” for the UK to part with the £40 billion financial settlement, which Theresa May agreed with the EU last year, if negotiations came to a halt.

Describing a possible no-deal scenario to the Lords EU committee, Mr Raab said: “It could not be safely assumed that the financial settlement would be paid in precisely the same shape, or speed, or rate. That would be a peculiar position for the UK to take. We regard the package as a whole.

“The financial settlement reflects a whole range of considerations, not just the strict legal obligations, and…