David Davis, secretary of state for exiting the European Union, and Michel Barnier, the European Commission’s chief negotiator, start their first round of talks at 11am.

The discussions will include working groups, and meetings of Brexit coordinators from both sides, before a joint press conference at 6.30pm.

Little is expected of the first day’s negotiations, with it unlikely that anything definitive will be laid out for some time.

However, any push for a ‘hard Brexit’ – with little in the way of systems and agreements in place – may have been compromised by the recent UK General Election result.

While the Chancellor has reiterated that the UK will depart the single market and customs union when it departs the EU, he said that leaving without a deal in place would be ‘a very, very bad outcome for Britain’. Hammond added that a worse outcome would be an arrangement in place that is punitive.

Labour Brexit spokesman Sir Keir Starmer said Britain would leave the EU, but membership of the customs union should still be ‘on the table’ – this membership would stop Britain from signing free trade deals with other non-EU countries.

Hammond is also looking to ease back on austerity measures, following Labour’s gains on a manifesto of ‘spend and invest’. He said that the Conservatives’ policies were ‘proposals that we will now have to look at again in the light of the general election result’.

The Chancellor said he had already added flexibility into austerity plans to ‘respond to the situation on the ground’. However, plans to bring public finances into balance by the mid-2020s would be adhered to, he added.

Report by Kevin Reed