BRITAIN will have to accept the freedom of movement of EU citizens if it wants to maintain access to Europe’s single market after Brexit, Angela Merkel has warned.

The German chancellor spoke out as David Cameron attended what will be his last European Council following the announcement of his resignation, stressing how, while the UK might be on the way out of the EU, it should maintain a full relationship with the Brussels bloc.

Mrs Merkel made clear that the UK would not be allowed to "cherry-pick" the elements of EU membership it wanted to hold on to after its withdrawal.

Mr Cameron has issued a fervent appeal to the other 27 EU nations to take a "constructive" approach to negotiations with his successor on Britain's future relations with the bloc.

On Monday, he told MPs there was "a very strong case" for trying to remain in the single market while chancellor George Osborne has stressed how Britain should seek "the closest possible ties" with its former EU partners on trade.

Just what the precise relationship the country will have with the EU will be at the heart of the work the new Whitehall Brexit Unit, announced by the PM this week.

Jeremy Hunt, the Health Secretary, has floated a "Norway-plus" arrangement under which the UK would enjoy single market access as the Scandinavian country does but with the addition of limits on free movement of people.

A deal of this kind should be secured and put to voters for approval in a referendum before initiating the two-year Article 50 withdrawal process, he explained.

But Mrs Merkel told the German parliament that she would ensure there was no negotiation "based on the principle of cherry-picking".

"If you wish to have free access to the single market, then you have to accept the fundamental European rights as well as obligations that come from it…freedoms of movement of people, goods, services and capital,” declared the German chancellor.

Mrs Merkel said Britain should remain a "friend and partner" after Brexit, but - in comments echoed by European Council president Donald Tusk - she again ruled out informal negotiations before the activation of Article 50, as sought by Boris Johnson, thought by some to be the most likely candidate to take over from Mr Cameron in September.

Arriving at a special Brussels summit of the European Council to discuss the fallout from Thursday's vote, Mr Cameron said: "While we are leaving the European Union, we mustn't be turning our backs on Europe. These countries are our neighbours, our friends, our allies, our partners, and I very much hope we will seek the closest possible relationship in terms of trade and co-operation and security, because that is good for us and it's good for them."

Francois Hollande said the EU had "no time to lose" in planning its future without Britain but Dutch PM Mark Rutte, who faces calls for a "Nexit" vote in the Netherlands, said: "It would be unwise to force a rapid departure; it would be prudent to give Britain time."

European Commission president Jean-Claude Juncker said Brussels officials have been ordered not to enter into any "secret negotiations" with the UK, telling MEPs at a special session of the European Parliament: "I don't think we should see any shadow-boxing or any cat-and-mouse games. It is clear what the British people want and we should act accordingly."

Downing Street characterised talks between Mr Cameron and Mr Juncker ahead of the summit as "amicable and constructive".

But earlier, Mr Juncker had a less friendly exchange with Nigel Farage after the Ukip leader loudly applauded him in the Brussels parliament for insisting Britain's democratic decision must be respected.

"That's the last time you are applauding here," he told Mr Farage. "Why are you even here?"

In highly charged exchanges, the Ukip leader was booed and barracked by MEPs as he accused them of being "in denial" about the failure of their single currency and their attempt to create political union in Europe.

The anti-EU party leader said he had been laughed at when he arrived in Brussels 17 years ago with a message that Britain must leave but told MEPs: "You're not laughing now."

Meantime, financial markets had some respite from the carnage of recent days with the FTSE 100 Index rebounding by 2.6 per cent after seeing £100 billion wiped off major companies' value following the Brexit vote. Sterling also rose 0.7 per cent to $1.33 after dropping to a 31-year low on Monday.