Tory divisions over Brexit were exposed afresh on Thursday, as Philip Hammond warned that leaving the EU without a deal would blow an £80bn hole in the public finances, just hours after Dominic Raab sought to play down the risks.

In the morning, the new Brexit secretary struck a determinedly optimistic note, as he launched 24 “technical notices”, advising businesses and consumers how to protect themselves against the risk of Britain exiting the EU in March next year without a deal – and dismissing warnings of a sandwich shortage.

But details in the papers included 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.

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As experts were still combing through the stack of papers, Hammond’s department released a letter from the chancellor to Nicky Morgan, chair of the treasury select committee.

He highlighted Whitehall forecasts from earlier this year, suggesting the hit to economic growth if Britain left without a trade deal would force the Treasury to borrow an extra £80bn a year by 2033.

“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,” Hammond wrote.

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Morgan said: “The Chancellor has confirmed that the Government forecasts a disastrous hit to our economy and living standards in the event of a ‘no-deal’ Brexit.”



Leavers reacted furiously. Jacob Rees-Mogg, chair of the European Research Group (ERG), said: “The Treasury and the chancellor want to undermine Brexit but their incessant scaremongering has led to the self-immolation of their credibility.”

The ERG, which claims the backing of more than 60 Conservative MPs, hopes to force the prime minister to “chuck Chequers”, the negotiating position painstakingly agreed at a cabinet awayday in July — prompting the resignation of Raab’s predecessor, David Davis.

Hammond is among those in cabinet calling for the closest possible relationship with the EU, with the strong backing of business secretary Greg Clark.

Scottish first minister, Nicola Sturgeon, said on Thursday a no-deal Brexit would be an unmitigated disaster. “The fact that UK govt is even talking about it is evidence of their abject failure,” she tweeted.

Nicola Sturgeon (@NicolaSturgeon) A ‘no deal’ Brexit would be an unmitigated disaster - and the fact that UK govt is even talking about it is evidence of their abject failure. That they once had the nerve to tell us that independence threatened our place in Europe adds insult to injury. Scotland deserves better. https://t.co/zDQWuajRAC

Her Brexit secretary Mike Russell urged the UK government to take the no-deal option entirely off the table, describing its consequences as a nightmare for consumers, the NHS, farmers and businesses.

However, Scottish government officials acknowledged they were also preparing for a no-deal scenario, insisting any responsible government should plan for all contingencies, even if highly unpalatable.

“While a responsible government must prepare for all exit possibilities, the UK government should rule out a disastrous ‘no deal’ and focus instead on securing the best outcome for us all – which, short of staying in the EU, is remaining part of the single market and customs union,” Russell said.

However, in his speech on Thursday, Raab said that after the passing of the EU Withdrawal Act, and with 7,000 civil servants already working on Brexit, and funding in place to hire 9,000 more if they were needed, “our laws will be on the statute book, the staff will be in place, and our institutions will be ready for Brexit, deal or no deal”.

But the technical notices warn businesses that if the UK leaves without a deal, “the free circulation of goods between the UK and EU would cease”.

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Traders are warned that they would have to fill out customs declarations for goods entering the UK from the EU – and should think about whether they should “engage the services of a customs broker, freight forwarder or logistics provider to help, or alternatively secure the appropriate software and authorisations”.

The technical notices also made clear Britain expects the EU to start imposing tariffs on UK goods in the event of no deal.

Businesses should “if necessary, put steps in place to renegotiate commercial terms to reflect any changes in customs and excise procedures, and any tariffs that may apply to UK-EU trade”, the notice on “trading” says.

Business groups said they would still like to see more clarity. Adam Marshall, director-general of the British Chambers of Commerce, said: “Ministers say they will take unilateral steps to keep trade moving freely but must demonstrate what they will concretely do to limit the impact of delays, inspections and red tape.”

In a series of other areas, the technical notices underlined the steps the government is taking to ensure continuity, with existing regulations in sectors from workers’ rights to the export of dangerous products due to be transposed into UK law under the EU Withdrawal Act.

However, with the contentious issue of the Northern Ireland backstop still unresolved between the UK and EU27, businesses trading across the border are advised that they may need to consult the Dublin government.

“The UK would stand ready to engage constructively to meet our commitments and act in the best interests of the people of Northern Ireland, recognising the very significant challenges that the lack of a UK-EU legal agreement would pose in this unique and highly sensitive context,” the note said.

Facebook Twitter Pinterest Brexit Minister Dominic Raab said he hoped cooler heads would prevail. Photograph: Peter Nicholls/AFP/Getty Images

“If you trade across the land border, you should consider whether you will need advice from the Irish government about preparations you need to make,” it added.

Raab, who is keen to spend more time negotiating in Brussels than Davis did, claimed the withdrawal agreement between the EU and the UK was 80% complete, and pledged to step up the pace of talks.

Asked directly about the risks to British citizens living abroad, he said he hoped “cooler heads would prevail”, and allow “practical co-operation” over issues such as access to pensions.

“It’s hardly in the interests of southern Spain to do harm to the British pensioners living out there,” he said.

• This article was amended on 29 August 2018. An earlier version said Philip Hammond suggested in the event of Britain being left without a trade deal, the Treasury would be forced to borrow “an extra £80bn over the next decade”. This has been corrected to say Hammond suggested Treasury borrowing would reach £80bn a year by 2033.