Merkel: Britain will ‘pay a price’ for pushing ahead with its post-Brexit immigration plans

She said: “It is very much in the hands of Great Britain and the British government, how they shape the relations later.”

“At the moment the whole European set of rules applies, which has some protective elements, such as the working-time directive or on environmental regulations, consumer protection, etc.,” she said.

“When Great Britain has left the EU it will, of course, be free to change all these regulations. This is a matter for the UK and we must then consider how we react to it.

“The field of competition can shift. If we have higher or lower environmental regulations — I now want to remain quite neutral — in the EU and Great Britain increases or decreases its environmental regulations, then that has an impact on competitiveness and then the EU must be free to react.”

Germany’s position on Brexit has hardened since Chancellor Philip Hammond warned in January that he would slash taxes and turn Britain into a corporate tax haven if the EU fails to provide it with a favourable trade deal.

Talks between the UK and EU are expected to begin almost immediately after the British general election on June 8, which May is tipped to win by a landslide.