European Union's Michel Barnier says 'frictionless trade' with UK after Brexit is 'not possible'

European Commission chief Brexit negotiator has rubbished the idea that Britain could have "frictionless trade" with the bloc after Brexit.

Michel Barnier also doubted whether Britain "fully understood" the consequences of its vote to leave the European Union in March 2019.

In a tough speech to business and union leaders in Brussels Barnier said frictionless trade was "not possible" with a country outside the EU's single market and customs union.

Leaving these two agreements are a central part of the Brexit negotiations laid out by Prime Minister Thersea May.

Brexit Secretary David Davis has said a new trade deal should deliver the "exact same benefits" as single market membership.

But Barnier said only a combination of a customs union, which cuts tariffs and a single market, which guarantees free movement, "allows this free, 'frictionless' trade between our states. One does not go without the other."

He also poured cold water over moves by the City and the car industry to cut special deals to remain in the free market.

The negotiator said: "There can be no sector-by-sector participation in the single market: you cannot leave the single market and then opt-in to those sectors you like most – say, the automobile industry or financial services.

"You cannot be half-in and half-out of the single market."

City delegation in Brussels

This week a City delegation is expected in Brussels to press for a free-trade deal on financial services following Brexit, led by former Conservative City minister Mark Hoban.

They will push for an agreement based on the principle of "mutual access" – allowing financial groups from the UK and the remaining 27 members of the EU to operate in each other's markets without barriers if the UK leaves the single market. It would also involve shared regulatory supervision and joint dispute resolution.

Meanwhile, Barnier stressed that a 'no deal' deadlock would be worse for Britain than the European bloc.

He said in that scenario business would fall back on World Trade Organisation rules that would include duty of almost 10% on vehicle imports and around 19% on alcohol.

Barnier added that these rules would also mean the introduction of "very cumbersome" border controls that could see exports take three or four days to complete instead of a few hours.

He said a "'no deal' would aggravate the 'loser-loser' situation which necessarily results from Brexit. And the UK would have even more to lose than its partners."

The Prime Minister's official spokesman said: "We've set out our relationship that we seek. We want an agreement that allows for trade that is as frictionless as possible. That is the best for both sides"

"Our position is clear and we set out to negotiate a deal which is in our best interests and that of the EU."