A leaked EU report has warned that a "badly designed" final deal in the Brexit negotiations will damage not just the UK but the remaining 27 EU member states as well.

The paper, prepared by officials working for the European parliament's Committee on Economic and Monetary affairs (Econ), highlights the fact that UK-based financial services account for 40% of Europe's assets under management and 60% of its capital markets business.

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"And UK-based banks provide more than £1.1tn ($1.26tn) of loans to the other EU member states," the committee's paper states.

"If financial services companies choose to leave the UK as a result of Brexit, the consequences should be carefully evaluated," it adds.

The report further says: "The exclusion of the main European financial centre from the internal market could have consequences in terms of jobs and growth in the EU. It is in the interest of EU 27 and the UK to have an open discussion on this point."

The Guardian said the 26-page report called Impact of the UK Withdrawal on Econ Areas of Competence and dated 13 December 2016, said that an analysis of offering equivalence status to the UK has been designated as a priority by "Econ coordinators."

Equivalence status allows both the UK and EU regulations to be given equal standing, thereby enabling London-based financial institutions to continue to operate across the 27 member states in a similar fashion even after exiting from the bloc.

The report says: "Given the considerable interdependence between the UK and the EU economy and financial systems, it is critical that a workable agreement is achieved that not only maintains high regulatory standards but also delivers growth and jobs across the EU ...".

The overriding principle, the report adds, is that the closer the UK chooses to remain to "established EU regulatory standards", then it will have a greater degree of access to the single market and vice versa, without prejudice to other considerations like the principle of the unity of the four freedoms, The Guardian reports.

The four freedoms of the EU are the freedom of movement of goods, people, services and capital over borders. They are the key principles behind the EU and underpin the single market.

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The long-term benefits of a Brexit could outweigh its short term costs for London Dan Kitwood/ Getty Images

It however did say: "If the UK does leave the single market and thereby resigns from the four freedoms and the jurisdiction of the court, then consideration could be given to tools such as third country/equivalence passporting regime, and this should be taken into account on existing a regimes as well as future pieces of financial legislation: including securitisation."

The report, The Guardian notes, will help strengthen Prime Minister Theresa May's negotiating power when entering into Brexit talks with the EU.

The report however did note that there are some positive aspects to the UK quitting the EU. It said the recent proposed single set of rules for the calculation of companies' taxable profits in the EU is expected to be opposed by the UK, as it had done so for the 2011 proposal.

Secondly, the UK's departure "may increase chances of reaching the required unanimity in council" in getting it passed, although the committee did acknowledge that the UK was not the only member to have opposed the Common Consolidated Corporate Tax Base.

The other proposal - the double taxation dispute resolution mechanism - which allows companies and individuals recourse to a pan-European body if they are being taxed on the same profits by multiple national revenue bodies - is also another likely issue that the UK is likely to not agree to.

It said: "While the UK may support the proposal in principle, it is rather unlikely that the UK would agree to a binding mediation and a decision making body at EU level. Again, the UK's departure from the EU may therefore increase chances of the proposal reaching the required unanimity in council."

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