The British government is living in “fantasy land” if it believes that it can an amicable break-up with the EU in the event of a 'basic' Brexit, senior EU officials and diplomats have told The Telegraph.

Three separate EU sources in both Brussels and a leading EU capital have warned that British expectations of a “no deal, deal” had failed to understand the ramifications of the UK pulling out Europe without paying its bills.

The tough European line raises serious question about the value of assurances given by David Davis to the Lords this week that Europe would do a “basic” deal with Britain in the event that both sides were unable to negotiate a trade deal.

The Brexit secretary told the Lords EU select committee that in the “very, very improbable" event that a deal proved beyond the two sides, worst-case scenarios would be averted.

“Whatever happens we will have a basic deal without the bits we really want,” he said.

However European officials are adamant that if the UK exits the EU without a deal - leaving an immediate €20bn black hole in the EU’s seven-year budget framework - there will be no appetite to engineer a soft landing for the UK.