A letter from the Brexit Secretary to Theresa May has raised concerns about EU planning for a “no deal” giving Britain “third country status” in what appears to be an act of bad faith.

Mr Davis told the Prime Minister he would urge the EU to drop measures and guidance that could require UK companies to relocate to Europe or risk contracts being terminated in the event of no deal.

He added that he had sought legal advice but that the chances of a successful challenge against the measures were "low" and could be "high risk politically and financially".

He said he would urge the European Commission's Brexit taskforce to withdraw the statements made so far, in light of the deal reached in December to begin trade negotiations.

Mr Davis warns Mrs May that EU agencies have issued guidance to businesses stating that the UK will become a "third country" after Brexit in March 2019, with no reference to a future trade deal sought by both sides.

The guidance says "compliance activity", such as quality control of goods or medicines before they are released into the single market, "would need to be based in the EU or EEA (European Economic Area)" after Brexit.

The Commission has also issued "unilateral" statements on company law, civil justice and private international law, transport, and the breeding transport and protection of live animals which do not take into account a transition period or trade deal, he said.

Mr Davis described the moves as as "potential breaches of the UK's rights as a member state" of the EU and insisted "we cannot let these actions go unchallenged".

As well as urging the commission to withdraw its statements, the Brexit Secretary said he would provide reassurance to British businesses.

The letter was revealed as the SNP and Lib Dems tried to launch a new campaign to keep Britain under Brussels rule by getting it to remain in the EU single market and customs union.

Mr Davis’ anger was reflected by leading Brexit campaigner John Longworth, the co-chairman of Leave Means Leave and former director of the British Chambers of Commerce who will meet Mr Barnier with a business delegation today.

He said: “I am concerned that the EU’s negotiating team is looking increasingly out of step with the mood of many of the EU27 national governments who recognise the importance for their own economies that a free trade deal is reached with the UK.

“I will urge Mr Barnier to ensure that this is rectified and reflected in future negotiations.”

The UK has also put aside £3 billion for a “no deal” situation where it has to start trading with the EU on World Trade Organisation rules.

Economists for Free Trade led by Professor Patrick Minford have estimated that simply leaving the EU without a formal deal could boost UK GDP by around £150 billion a year.

The letter has been revealed amid signs that the EU’s ranks are beginning to split with the Dutch Prime Minister Mark Rutte forced to give Mr Barnier a vote of confidence after the two held a meeting amid reports that the Netherlands and others are running out of patience with the negotiator’s slow pace and lack of willingness to settle a deal.

Meanwhile a senior Italian minister Carlo Calenda has broken ranks and said Britain needs a bespoke trade deal for the good of the EU.

Speaking to Bloomberg, he said: “I think Canada plus plus plus will be the minimum we need to achieve.”