Theresa May questions Government over trust

Amid warnings from the EU that if it reneged on the divorce deal there would be no agreement governing the roughly £800bn annual trade, former PM Theresa May said the government risked serious damage to its international image.

"The government is now changing the operation of that agreement," May, who resigned after her own Brexit deal was repeatedly rejected, told parliament.

"Given that, how can the government reassure future international partners that the UK can be trusted to abide by the legal obligations of the agreements it signs?" May asked.

The Financial Times said the government's "very unhappy" legal head Jonathan Jones walked out in protest over the possible plan to undercut the withdrawal agreement in relation to the protocol for British-ruled Northern Ireland.

The prospect of a messy divorce between the EU's £12.2 trillion and United Kingdom's £2.3 trillion economies pushed sterling to two-week lows with traders betting there was more volatility to come.

"We need to see more realism from the EU about our status as an independent country," said David Frost, Britain's top Brexit negotiator, adding that Britain was ramping up no-deal preparations.

The latest round of negotiations in London are likely to be tough: Britain says the EU has failed to understand it is now independent - especially when it comes to fishing and state aid.

The EU, weary of wrangling, says it needs specifics from London and that Britain cannot make its own rules and have preferential access to its markets.

"A disorderly Brexit would not be good for Europe, it would be a real disaster for Britain and its citizens," German Finance Minister Olaf Scholz told Reuters.

British officials say they can make do with an Australia-style arrangement. Australia is negotiating a free trade deal with the EU to improve its market access, but for now largely trades with the bloc on World Trade Organisation terms.