After ten months of planning, Davis will meet with the EU's Chief Negotiator Michel Barnier to agree the structure of the negotiations ahead, so officials have a framework within which to discuss substantive issues.
The negotiations come against the backdrop of an increasingly fractious political climate in the United Kingdom following the general election, and the fallout from the Grenfell Tower fire disaster.
The negotiations have been called the most complex in Britain s history as it unravels 44 years of membership and its threat to walk out with no deal in place has anxious European capitals.
Working groups will be set up to focus on three key areas - the status of EU citizens living in Britain and British citizens living in the EU; the divorce bill for Britain; and the future of the Northern Irish border with EU member Ireland.
"We will leave the customs union when we leave the European Union".
The EU insists that phase one of talks will focus only on the terms of withdrawal, and not on a future trade relationship.
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It comes after senior Whitehall sources told The Daily Telegraph that Mr Hammond was pushing for a deal where Britain could retain associate membership of the customs union, but retain the freedom to negotiate separate deals on trade services.
What that future relationship will look like remains anyone's guess.
It is also 82 days after Theresa May sent a letter formally notifying the European Council of Britain's intention to withdraw.
The SNP's Westminster leader Ian Blackford called for cross-party, cross-government talks.
Amid reports that May is set to make a "generous offer" on the rights of European Union citizens remaining in Britain, the source said London had been warned against doing so this week, on the grounds that it could drag up the thorny issue before talks had really got going. But the disastrous outcome of the June 8 snap election, which left her without a majority in the House of Commons, has raised doubts over whether she will even be able to see the two-year process through.
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Some Grenfell residents had warned months ago that fire safety issues at the tower left it at risk of a "catastrophic" event. Construction company Rydon made the refurbishment of the block worth Rs 8.7 million pound and was completed in July 2016.
Yet many in Brussels fear that London has no real strategy, with May under pressure at home, still trying to close a deal with a conservative Northern Ireland party to stay in power, and facing criticism for her handling of the aftermath of a devastating tower block fire.
Before the election, Ms May proposed a clean break from the European Union: leaving its single market, which enshrines free movement of people, goods, services and capital, and proposing limits on immigration and a bespoke customs deal with the EU.
But he warned that "we need to get there via a slope, not via a cliff edge".
Earlier, Mr Hammond told the BBC's Marr programme: "We're leaving the EU and because we are leaving the EU, we will be leaving the single market and by the way, we will be leaving the customs union".
A spokesman for the Department for Exiting the European Union said: "We believe that the withdrawal process can not be concluded without the future relationship also being taken into account".
Barnier says the two sides must reach agreement on a deal by October 2018, to give the European and British parliaments time to ratify the deal by Brexit Day in March 2019.
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