The EU's chief negotiator said that the United Kingdom government's position made it clear that the United Kingdom is leaving both the Customs union and the Single market, and this would not allow "frictionless trade".
Barnier also said that the European Union would not seek to punish the UK: "There is no punishment for Brexit and of course no spirit of revenge".
Mr Barnier said that the commission had made it clear to the United Kingdom government that there could be no sector-by-sector participation in the free market and that the EU's "four freedoms" - including freedom of movement - were indivisible.
A month into formal talks over the split, Barnier used an address to an European Union committee in Brussels to tell Britain that any type of breakup will carry costs, delivering a blow to members of Theresa May's government who are distancing themselves from her initial hardline stance and seeking to retain close links.
"On the European Union side, we made three things very clear: the free movement of persons, goods, services and capital are indivisible".
Ten days before the first week-long round of talks, which will start on 17 July in Brussels, the European Union negotiator laid out the nearly inextricable situation faced by the United Kingdom government.
"I have heard some people in the United Kingdom argue that one can leave the single market and keep all of its benefits".
Chancellor of the Exchequer Philip Hammond is among those advocating a deal focused on safeguarding the economy and there is speculation the United Kingdom may now try to stay in the tariff-free customs union or even perhaps the single market. "And I say this at the moment when the United Kingdom has made a decision to leave this community and become a third country". Mr Barnier makes a point today of spelling out that the first phase negotiation topics must be settled "together" (underlined) suggesting he sniffed slippage in the chat with the Brexit Secretary on that. "But Brexit has a cost, also for business in the EU27, and businesses should assess with lucidity the negative consequences of the United Kingdom choice on trade and investment and prepare to manage that".
He went on: "Let me be clear, these consequences are the direct result of the choices made by the United Kingdom, not by the EU".
Downing Street said the Government did understand the EU's position and was focused on "getting a deal that works for both sides" but acknowledged there were "strong feelings" in Brussels about the result of the Brexit referendum. He reported that the UK's red lines for any future relationship were: no more free movement of EU citizens; full autonomy over United Kingdom laws and no role for the European Court of Justice, and; autonomy to conclude own trade agreements. There is no sense in making the consequences of Brexit even worse.