Theresa May has insisted she is prepared to walk away from the Brussels negotiating table if no satisfactory deal is on offer.
However, a group of unelected peers have urged the prime minister to think again, as she risks “serious harm” to some sectors of British business if she opts for the hard-line option.
They fear some UK industries could be “forced” to restructure or relocate their operations to within the remaining 27 EU states.
A group of Lords warned Theresa May leaving the EU without a trade deal was a "serious risk"
You have to get as close as you can to what would have been single market provisions
Larry Whitty, chairman of the EU internal market sub-committee, told Radio 4 on Wednesday: “We’re talking about the non-financial services.
“It’s everything from legal services, aviation, fashion, music, digital – a whole range of industries where the Brits are at the cutting edge operating competitively with the EU and globally.”
The upper chamber has urged the government to prioritise agreeing on a temporary arrangement under which businesses can continue to trade under until a permanent deal is reached.
The prime minister is adamant “no deal for Britain is better than a bad deal for Britain,” but the Labour peer said leaving without an agreement could have a huge impact on British services.
The prime minister will begin official Brexit talks next Wednesday
“Issues like intellectual property, access to licences, neutral recognition of qualifications, all of those things which are provided for in the albeit imperfect EU single market would go if we were completely outside,” Lord Whitty continued.
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“It’s the government’s intention to negotiate a free trade deal, what we are saying is in that free trade agreement, you have to get as close as you can to what would have been single market provisions.”
Mrs May is poised to trigger Article 50 on March 29, firing the two-year starting gun for Brexit negotiations to begin.
Theresa May's most powerful quotes Fri, March 10, 2017 Getty Images 1 of 8
'I will be ruthless in cutting out waste, streamlining structures and improving efficiency'
The prime minister is expected to take a tough stance at the start of talks with the bloc, by announcing Britain could impose tariffs on EU imports in this year’s Queen’s Speech.
The bill will be passed within the next year so it will be in place for when Britain is pulled out the EU, according to the Sun.
A Government insider said it will “come as no surprise” a trade bill will be part of the Government's “Brexit Queen’s Speech”.
A Whitehall source added: “There are a number of decisions that need to be taken, but all options are still being considered.