German chancellor Angela Merkel has hardened her stance on Britain’s exit from the EU, warning European business not to press for “comfortable” deals in the Brexit negotiations that could undermine the bloc’s principles, including freedom of movement.

Days after British prime minister Theresa May signalled she favoured a clean break from the single market, Ms Merkel toughened her own rhetoric.

Appearing at a Berlin business conference, the German leader argued that the EU’s fundamental principles must be protected when it negotiated sector-by-sector reciprocal market access agreements between the UK and the remaining EU.

Mrs May’s insistence on new immigration controls and an end to the jurisdiction of the European Court of Justice makes it highly unlikely that Britain would seek to stay in the EU’s single market.

British ministers instead now speculate on the possibility of seeking sectoral deals to keep trade flowing, including a special regime for key traded goods such as cars. They also argue that the importance of the UK as a market for EU goods will oblige European governments to offer favourable trade terms.

Ms Merkel urged companies in sectoral talks to resist “pressure from European industry associations” and avoid the temptation to set aside EU principles — especially the freedom of movement — because it was “comfortable” to do so.

The chancellor dropped her usual references to the importance of maintaining close ties with the UK and instead highlighted her main priority — keeping together the EU 27.

She told the annual conference of the BDI, the German industry association: “If we don’t insist that full access to the single market is tied to complete acceptance of the four basic freedoms, then a process will spread across Europe whereby everyone does and is allowed what they want.”

Warning that the Brexit negotiations would be hard, Ms Merkel said the central question would be “how much access to the single market does Great Britain get, and in a reciprocal way, how much access to the British market do we get?” She added: “And how ready are we to link this access politically so that the four freedoms are defended.”

EU politicians have begun to harden their approach to Brexit in recent days as it becomes clear that the UK is not interested in a close association with the EU akin to Norway’s — with full access to the single market — but in a complete break.

Officials committed to smoothing the Brexit talks are concerned that the worsening political atmosphere could make life more difficult. Some are also worried that the UK might try to block other EU initiatives, where the remaining 27 plan to increase co-operation. Britain has already signalled its opposition to Franco-German proposals for a combined European civilian-military headquarters — even though the UK would itself play no role in such an operation after Brexit.

Ulrich Grillo, the BDI president, who spoke before Ms Merkel, warned of a worldwide rise of “globalisation bashing” and urged political leaders to fight back and defend open societies and economies.

He made clear he was speaking of populist challenges ranging from Brexit, to widespread protests against TTIP, the planned US-EU trade pact, Germany’s anti-immigration Alternative for Germany, and the rise of Donald Trump, the US presidential candidate.

“Political extremists” are on the rise, said Mr Grillo in a statement. They were advancing concrete policies of “nationalism, protectionism, isolation”.

His warning echoed that of the International Monetary Fund, which also spoke out against populism this week.