A detailed briefing ruling out large parts of the Prime Minister’s final offer on a new relationship with the EU was prepared the day before the crucial cabinet meeting at Chequers, but was held back after a handful of European governments backed a UK request for it to be kept private, amid fears about the impact a swift rejection would have in London.
Leaked papers are also said to reveal the EU’s concerns that UK spies have “bugged” their negotiators to get an advantage in talks.
UK and EU officials reconvened in Brussels after the summer holidays, with Brussels officials playing down the likelihood of a breakthrough when leaders meet at a summit next month in the Austrian city of Salzburg.
Brexit was added to the agenda for the meeting after Mrs May met the Austrian Chancellor Sebastian Kurz last month, giving Downing Street an extra opportunity to lobby all 27 EU governments face to face.
Westminster will return from its summer break in a fortnight amid mounting concern that the UK could tumble out of the EU without a Brexit deal.
Latvia’s foreign minister warned on Wednesday that he likelihood of a no-deal outcome was “50-50”.
The EU refused to deny reports that its Brexit negotiators believe they have been bugged by British spies.
Officials raised security concerns after the UK obtained sensitive documents “within hours” of them being discussed at the briefing on 5 July – the day before Mrs May’s cabinet gathered at Chequers.
Sabine Weyand, the EU’s deputy chief Brexit negotiator, reportedly told officials at a European Council working party on exit talks that “it could not be excluded” that British intelligence had penetrated their meetings.
British negotiators were said to have obtained the contents of a slide presentation that set out the European Commission’s negative economic assessments of UK plans to remain in a single market for goods.
Hours after the presentation, the UK lobbied at the “highest level” to block plans to publish the slides, according to the Daily Telegraph.
A European Commission spokesman told journalists in Brussels at a regular briefing: “The commission’s position today is that we cannot comment on this press report.”
Reports suggest that the Belgian, Dutch and Italian governments made representations to the EU following the 5 July briefing, backing UK calls for slides prepared at the meeting not to be made public.
The briefing is understood to have outlined that giving the UK the opportunity to diverge from EU rules on services, as proposed under Mrs May’s Chequers plan, would give London a significant competitive trade advantage.
Before the Prime Minister’s plan was presented to her government, Brussels officials concluded that “erosion in the single market” over a 15-year period would have similar negative impact on the EU economy as a no-deal is expected to have on the UK – 8 to 9 per cent of GDP.
The slides point out that while they are considered manufactured goods, 20 to 40 per cent of the value of a car is made up of services, and nearly 70 per cent of the value of chemicals relates to production and processing methods, areas where the UK could set its own standards and undercut EU rules.
The revelations will raise fears that the EU could be more willing than previously thought to accept a no-deal Brexit if it doesn’t secure the terms it wants in talks.
Brexit Secretary Dominic Raab and EU chief negotiator Michel Barnier are not involved in the latest round of discussions, which are focused on the Irish border and future relations, and are due to finish on Friday.