The chancellor is facing the heat from Tory MPs and right-wing media following his warning of "large fiscal consequences" for the UK if there is a "no-deal" Brexit.

Philip Hammond released a letter stating that no deal would blow an £80bn hole in the public finances, just hours after Brexit Secretary Dominic Raab sought to play down the risks as he released the first batch of papers on how the UK will prepare for a no-deal.

A rift has opened up between the Treasury and the Department for Exiting the EU (DEXEU), with the two departments giving conflicting accounts over whether there was prior agreement over Mr Hammond's letter.

Sky News sources at the Treasury said: "The Brexit Secretary was shown the letter two weeks ago and agreed to it going out today."

However, Sky Sources at DEXEU said "this is categorically untrue".


Little comfort for finance sector in 'no-deal' Brexit papers

Many of today's newspapers have attacked the chancellor: The Daily Mail headline reads "Eeyore Hammond Launches Project Fear (Pt2); the Daily Express asks "What does Hammond Think He's Playing At?"; The Telegraph splashes "Hammond Under Fire For No Deal Warning"; and The Times leads with "Brexit Splits in Cabinet Laid Bare By Hammond".

Details in the DEXEU papers include a warning that UK citizens living in the EU could lose access to payments and pensions from UK banks, and that credit card payments to the EU could become more expensive.

In a letter to Nicky Morgan, chairwoman of the Treasury select committee, Mr Hammond highlighted Whitehall forecasts from January, suggesting a big hit to economic growth if Britain left the EU without a negotiated settlement.

Mr Hammond wrote: "Chemicals, food and drink, clothing, manufacturing, cars, and retail were estimated to be the sectors most affected negatively in the long-run, with the largest negative impacts felt in the north-east and Northern Ireland."

Govt lays bare consequences of 'no deal' to British people

Jacob Rees-Mogg, chair of the European Research Group (ERG), told Sky News: "The Treasury designed Project Fear and loves its own work even though it has been entirely wrong so far."

Former cabinet minister John Redwood said: "There are some in government who want to say there are complications if we leave without a formal agreement. I think it is wrong. I think a lot of the invented ideas of things that could go wrong are completely untrue and I'm pleased to see the Brexit Secretary say so."

A Sky Data study conducted from 17-20 August - just before the no-deal papers were published - shows a growing negative shift in opinion about the way the negotiations are going.

Some 69% now believe we will get a bad deal, as opposed to 37% in March this year.

Six out of 10 people think opinion has shifted against Brexit since the referendum and one third of leave voters (37%) think the outcome will be worse than they expected.

What the 'no deal' papers actually say

Meanwhile, the foreign secretary said he was "cautiously hopeful" rather than "wildly hopeful" of securing a Brexit deal.

Jeremy Hunt said MPs will only accept a deal which is consistent with the "letter and spirit" of the 2016 referendum result to leave the EU.

In New York, Mr Hunt told reporters: "I think parliament will only accept a deal that is consistent with the letter and spirit of the referendum result - the decision by the British people to leave the European Union - and indeed that is the only agreement that Theresa May and her government, of which I am part, would ever put to parliament.

"And we are hopeful, cautiously hopeful, rather than wildly hopeful, that we will come to an agreement with the EU because we think it's in their interests as well as ours."

There are still 60 more government no-deal studies to be published over the next few weeks - ensuring that this debate will only intensify when politicians return to Westminster after the summer.