However, Mr Davis said that any attempt to cause economic damage to Britain will lead to other countries deciding to hold referendums and potentially quit the EU.

“If the EU adheres to a punishment plan and it fails, as I believe it would, then that's an even bigger incentive to countries that want to leave than no punishment at all,” Mr Davis said.

“The approach that is being talked about puts at risk the stability of the European Union. It's got financial instabilities of its own to be concerned with. Really it should be taking that as seriously as possible as well.”

He added: “The damage done by a supposed punishment strategy would be primarily to the industries and farmers on the continent who export to this country.

“I'm afraid that Mr Hollande and Madame Merkel and others will find they have pressure back from their own constituents that says this is not a good strategy to pursue.

“We believe in this country in free trade. It's beneficial to both sides. I do not see how there is a logic in exercising a punishment strategy against one of your strongest and most loyal allies.”