A leading think tank today urged the Government to quit Brexit talks and walk away if the EU tries to impose a bill of more than £26billion.

The Institute of Economic Affairs said a larger figure would be unreasonable as the two sides wrestle with trying to reach a deal that works for both.

A bill of £26billion is significantly lower than the £60-£100billion that has been suggested by senior officials in Brussels, including Commission chief Jean-Claude Juncker.

But it is also much higher than the figure of arounf £10billion which has been endorsed in London. Many Tories do not believe a bill of any level would be reasonable.

Prime Minister Theresa May has said Britain will pay any genuine bills and expects to settle up on commitments already made in the current budget period to 2020

A bill of £26billion is significantly lower than the £60-£100billion that has been suggested by senior officials in Brussels, including Commission chief Jean-Claude Juncker (right at the EU summit on Friday)

Prime Minister Theresa May has said Britain will pay any genuine bills and expects to settle up on commitments already made in the current budget period to 2020.

Future bills such as pensions for EU staffers could also be included.

The Institute for Economic Affairs (IEA) chief economist Julian Jessop - head of the think tank's Brexit Unit, which launched on Monday - today said that the 'upper limit' for any payment should be £21 billion for liabilities under the EU's multi-year budget stretching up to 2020.

This could be increased by around £5 billion for pensions and other one-off items.

'The Brexit negotiations will need to decide how much the UK will pay the EU to settle financial obligations undertaken while it was a member,' said Mr Jessop.

'Many Brits would suggest that the right figure is in the ballpark of zero. However, some EU officials have suggested the bill should be north of 100 billion euros.

'A compromise towards the lower end of this range might be acceptable - a figure of around £26 billion could be justified using certain principles.

'But if the two sides fail to agree a good deal on the terms of any future relationship, the UK can, and should, walk away without paying a penny.'

In an interview on Sunday, David Davis (pictured on Andrew Marr on Sunday) played down the prospect of paying 'tens of billions' to the EU

The IEA said that a good outcome to negotiations underway between Brexit Secretary David Davis and EU chief negotiator Michel Barnier would provide 'a golden opportunity to create a more flexible, open and vibrant economy and to champion by example the benefits of free trade around the world'.

But it warned: 'A positive outcome is not guaranteed. Negotiations are ongoing and a 'good deal' is far from certain; Brexit could end up resulting in more bureaucracy and state intervention, rather than less.'

In an interview on Sunday, Mr Davis played down the prospect of paying 'tens of billions' to the EU.

He told Andrew Marr: 'Let’s see where we get to on that. I mean, the negotiation hasn’t started on that. And it won’t finish for quite a long time.

'We won’t know the answer to that for a year or two. So I wouldn’t get too bogged down in that.'