Round six of Brexit talks to be held next week

Announcement of the timing of the sixth round of formal negotiations came as it was revealed that as many as 5,000 extra staff are to be recruited by HM Revenue and Customs next year to deal with EU withdrawal.

Mr Davis told the Cabinet the move was part of an ongoing process which had already seen nearly 3,000 posts created across government to support Brexit efforts.

And he revealed that 300 lawyers have been recruited to the Government legal department in the past year.

Speaking to the Lords committee, Mr Davis said he had invited EU chief negotiator Michel Barnier to London for talks on Wednesday this week, but this was not possible because the Brussels official had a prior engagement.

The EU team was also unable to accept a UK proposal for talks early next week, he said. Negotiators will therefore meet on Wednesday and Thursday of next week before Mr Davis travels to Brussels on the Friday.

Mr Davis told the committee that he was not surprised that leaders of the 27 remaining EU states had determined earlier this month that insufficient progress had been made in talks on the divorce deal for the second phase of negotiations, dealing with trade, to begin.

But he played down the significance of the decision, saying it provided time for the EU27 to prepare its position on the issues of trade and the transition to a new relationship in time for a European Council summit in December, when it is hoped they will give the green light to the second phase.

"We think that the outcome we got was one which keeps us on the timetable for an outcome in time for what we want," Mr Davis told peers.

Some £662 million has already been committed for Brexit preparations over the course of this Parliament, with more than £250 million additional funding in 2017/18 and a further £412 million for the period up to 2022.

Cabinet heard the extra money would be spent on implementing changes at the border, preparing for future new trade agreements and converting existing EU law into domestic law on withdrawal.

Mr Davis told colleagues: "Alongside the negotiations in Brussels, it is crucial that we are putting our own domestic preparations in place so that we are ready at the point that we leave the EU."

British Prime Minister Theresa May told Cabinet colleagues that a new EU Exit and Trade sub-Committee was being created "to support the intensification of our domestic preparations".

Chaired by First Secretary of State Damian Green, the committee will "focus on domestic preparedness, legislation, and devolution".

The Cabinet Brexit discussions came amid reports the Bank of England has warned quitting could cost up to 75,000 financial services jobs.

Senior figures at the Bank said estimates over job losses were a "reasonable scenario", particularly if the UK leaves without special arrangements for the sector, according to the BBC.

Following on from the announcement of extra HMRC staff, former top Foreign Office official Lord Ricketts said Britain will also need to hire more diplomats to influence EU decision-making after Brexit.

The peer, who also served as Britain's ambassador to France, said there are "substantial" numbers of staff in Paris but that there is "overstretch" elsewhere.

He told the Commons Foreign Affairs Committee: "If you go to some of the smaller capitals, I mean there might be two UK diplomats and the capacity to engage across the whole spectrum is very much less, so I think it's an absolute consequence of Brexit that we will need to reinforce, particularly in the smaller EU capitals, to make sure that we can influence governments upstream of discussions."

Meanwhile, Mrs May's de facto deputy Damian Green announced that the Cabinet sub-committee overseeing negotiations has had its remit widened to also include Brexit "strategy" and its membership extended.

Brexiteers Liam Fox and Michael Gove were added to the committee, which is chaired by the PM, as were Greg Clark and Sir Michael Fallon, who voted Remain.

Existing members - Mr Green, Philip Hammond, Amber Rudd, Boris Johnson and Mr Davis - continue to sit on the committee.

A 19-strong new sub-committee, including chief whip Gavin Williamson and Lords chief whip Lord Taylor of Holbeach, was also created to oversee domestic preparedness for Brexit.

Mr Davis said he expected the divorce deal, which covers citizens' rights, the Irish border and Britain's financial settlement, was likely to "favour" the EU, while the trade deal would be beneficial to both sides.

"The withdrawal agreement, on balance, will probably favour the Union in terms of things like money and so on, whereas the future relationship will favour both sides and will be important to both of us," he told peers.

He insisted the UK regarded the deals on divorce and the future relationship as "inseparable", even if EU rules meant the trade deal cannot be signed until "one second after midnight on March 30", when Britain has left.

Mr Davis rejected the EU's characterisation of Britain's "divorce bill" as a legal obligation to settle debts, estimated in Brussels at around 60 billion euro. Instead, Britain saw any payment as a political decision.

A large payment would be more "acceptable" to British voters if it came along with a trade deal and agreement of a deep and special future partnership, rather than being announced before these issues had been dealt with, he suggested.

Mr Davis refused to put a date on when Britain would spell out what financial settlement it is willing to pay. And he played down suggestions that this was the "make or break" issue of negotiations.

Other issues like the future regulatory relationship and the treatment of financial services also had the potential to "make or break" the process, he suggested.

Mr Davis - who previously said negotiations might go right up to the wire in March 2019 - told peers that he hoped an agreement would be reached by October 2018, to allow time for ratification at Westminster and the European Parliament.

"If we hit October 2018, nobody would be more pleased than me," he said.

Acknowledging the pressure placed on him by Article 50's two-year deadline for talks, he quoted the comment of Napoleonic war hero the Duke of Wellington: "Ask me for anything but time."

Mr Davis warned the UK would face problems in maintaining an invisible border between Northern Ireland and the Republic if it was unable to secure tariff-free trade with the EU after Brexit, as well as an agreement on future agricultural regulations.

"If we achieve an outcome, as we hope to, which maintains tariff-free trade, then maintaining an invisible border will be relatively easy - I nearly said 'very easy', that would be wrong," he said.

"If we end up with a tariff arrangement, then we have got a real problem and dealing with that is difficult."