Brexit Secretary David Davis has sought to play down reports that Britain is facing a £40 billion “divorce bill” as the price of leaving the EU.

Following Theresa May’s declaration in Florence that she would be seeking a two-year transition after Brexit in 2019, Mr Davis confirmed the UK would pay in “roughly” £10 billion a year during that period.

However he suggested claims in Brussels that the final settlement once pensions and other liabilities were taken into account could be double that amount were “made up” and the UK would continue to challenge the EU’s financial demands.

“Things like pensions and other things, these are debatable to say the least,” he said in an interview with BBC One’s The Andrew Marr Show.

“The last time we went through line by line and challenged quite a lot of the legal basis of these things and we’ll continue to do that.

“That doesn’t mean that we want to see our allies and friends in Europe massively disadvantaged in the next few years and that’s what we’re aiming not to do.”

Asked about claims by “Brussels sources”, quoted in The Times, that the final settlement could be around £40 billion, Mr Davis said: “They sort of made that up too.”

(Daniel Leal-Olivas/PA)(Daniel Leal-Olivas/PA)

He added: “I’m not going to do an actual number on air, it would be ridiculous to do that, but we have a fairly clear idea where we’re going on this,” he said.

In her speech on Friday, Mrs May sought to reassure member states that they would not lose out financially during the current EU budget period – which runs to 2020 – in an attempt to end the stalemate in the Brussels negotiations.

However hopes in Downing Street her address would also end the Cabinet tensions over Brexit appear to have come to nothing after The Sunday Telegraph reported Foreign Secretary Boris Johnson was seeking assurances that Britain would not adopt any new EU rules during the transition period.

In his interview, Mr Davis made clear that while the UK would be leaving the jurisdiction of the European Court of Justice (ECJ), the existing arrangements would apply during the transition.

“We’ll come out from under the jurisdiction and the lawmaking of the European Union, we’ll have a couple of years which allows people to adapt,” he said.

A Department for Exiting the EU source said: “The framework for this period would be the existing structure of EU rules and regulations.”

In her speech, the Prime Minister said EU nationals would still be able to come to live in and work in the UK during the transition period, although they would have to register with the UK authorities.

She also promised the rights of EU citizens living in the UK would be written into British law and that the British courts would be able to take account of the rulings of the ECJ.

However Mr Davis made clear that they would not be able to enforce their rights through the ECJ as the EU has been demanding.

(PA Graphics)(PA Graphics)

“That’s not going to happen. Basically the aim with the withdrawal treaty will be to have British citizens in Europe and European citizens in Britain treated broadly similarly,” he said.

“We are not under any circumstances going to be accepting the overarching supremacy of the European Court. That’s going.”

He said it was “quite likely” that there would be a system of joint EU-UK courts to resolve disputes in this and other areas.

“Most international treaties, the Canadian-European trade treaty for example, have arbitration mechanisms that work between the two countries,” he said.

“Normally what happens is it’s something like one of theirs, one of ours and one neutral panel, or something like that. And that’s almost certainly where we’ll end up on this.”