The UK should approach negotiations with the EU with an understanding that it may not get a trade deal, a veteran Eurosceptic MP told attendees during the launch of a City law firm’s report into Brexit negotiations.

Peter Lilley, trade and industry secretary under Margaret Thatcher, social security secretary under John Major and now a member of the Department for Exiting the EU select committee, said there was ‘too much of a wide assumption that we will get a deal’.

Lilley was part of a panel that discussed law firm Hogan Lovells’ ‘EU’s third country regimes and alternatives to passporting’ report. The panel also included the chief executive of advocacy group TheCityUK as well as other politicians and lawyers.

The report, jointly produced by Hogan Lovells and the International Regulatory Strategy Group, said any deal between the UK and EU should allow ‘mutual market access and deliver the same levels of access rights to those currently available’.

The report, which focused primarily on the financial services industry, concludes ‘it is in the interests of both the UK and the EU (and of consumers in each) to retain some degree of access to each other’s markets’.

But Lilley said there were not enough facts available to to have a proper debate about the terms of exit. ‘I don’t believe the EU will be particularly nasty but it may want to ensure that other countries do not think that they will get a better, or as good a deal as it had before, after leaving,’ Lilley said.

He added that although Brexit ‘may cause them more pain than it does us’ the EU may want to hurt the UK as a deterrent to others to leave the union.

Rachel Kent, partner in Hogan Lovells’ corporate department, said she believed the report’s recommendations were ‘in line’ with the priorities outlined in the prime minister's speech last week.

Kent said financial services industry workers could either set up an EU-based subsidiary or abide by the EU’s ‘third country rules’.

However, she said neither of those options was optimal hence the need to establish a ‘bespoke deal’.

However another panel member, Conservative MEP Ashley Fox, said he thought the UK probably would be able to secure a deal. Fox said although there was ‘shock and disbelief’ in the European Parliament in the days after the vote he sensed that the EU was now ‘coming to accept’ the fact that the UK would be leaving and would be willing to negotiate.

The Law Society has previously listed continued access to the CJEU as a priority for England and Wales-based lawyers.

In its submission to the Department for Exiting the European Union and the Ministry of Justice, Chancery Lane also said the UK should focus on ‘maintaining, or introducing arrangements equivalent to EU directives on establishment and professional qualifications, mutual recognition and enforcement of judgments and maintaining collaboration in policing, security and criminal justice’.