Brussels will start a trade war with Britain if the UK presses ahead with plans to renege on the Withdrawal Agreement and ignores other sanctions possible under the Brexit divorce treaty, according to internal EU documents.
The bloc is also considering legal action against the UK, which could lead to large fines levied by the European Court of Justice, before the Internal Markets Bill is passed by parliament. That would heap pressure on MPs to rebel against Boris Johnson.
The EU is also prepared to use the dispute settlement process in the Withdrawal Agreement, which could result in further fines and binding rulings, a paper circulated among the bloc’s 27 capitals said.
If those sanctions fail to force Britain to cave, the EU will suspend any free trade deal or other agreements it may have with the UK, which could involve the imposition of tariffs and quotas.
“In case of non-payment or persisting non-compliance, the complaining party is entitled to suspend its obligations arising from the Withdrawal Agreement (with the significant exception of the provisions relating to citizens) or from the future EU/UK agreement," the paper said.
However, the Government is attempting to push through the legislation at speed, with the Bill expected to clear its first two hurdles in the Commons within a fortnight.
The move is likely to mean that the Bill will pass into law before any EU legal proceedings are completed.
The Telegraph understands that the sectors most likely to be targeted by the EU are agriculture and car parts. The City of London would also be likely to lose its access to the EU’s Single Market as part of a raft of sanctions levied against the UK.
“The union will take all appropriate measures to ensure the full implementation of the Withdrawal Agreement,” the document said.