Downing Street has hit back at the EU as the new battle-lines for a Brexit trade deal were drawn.
Theresa May's spokesman expressed confidence UK financial services would "get a good overall deal" despite Brussels' chief negotiator Michel Barnier ruling out a special offer for the City of London.
They said Britain would demand a "significantly more ambitious" agreement with Brussels than its one with Canada.
And they branded a Norway-style arrangement "democratically unsustainable, because it would mean automatically adopting all EU rules without influence or a vote".
The spokesman also appeared to suggest Brussels would back down over its own red lines.
They said: "This is the beginning of the phase two negotiations.
"You would expect the Commission to be setting out their position. I would imagine you will hear a lot more from them before you hear less."
It came after a "unified" Cabinet meeting on Tuesday, the first formal discussion by ministers to thrash out a preferred divorce end-state.
25 ministers contributed at the discussion that lasted just under two hours - but the topic of immigration was not mentioned.
Another round-table on the "long-term partnership" is scheduled for early 2018, the spokesman said, with the UK needing to be "creative" in its approach.
It puts the pressure on Government to come up with and agree on its desired end state and transition terms.
Labour MP and Open Britain supporter Chuka Umunna said: "It is disgraceful and a dereliction of duty that the Cabinet has only today - eighteen months after the referendum - had an opening full discussion about what our future relationship with Europe should look like.
"The problem is clear. The Cabinet cannot agree among themselves about what Brexit outcome they want beyond an unrealistic ambition to have cake and eat it."
The UK hopes an "implementation period" deal can be reached by March, with trade talks to follow, completed by October.
But EU Council President Donald Tusk warned at last week's summit where the phase one deal was struck that the next phase timetable is achievable but "dramatically difficult".
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