Britain cannot remain in the European customs union after Brexit if it wants to strike free trade deals with other countries around the world, Theresa May has warned.
Ministers are coming under renewed pressure from business leaders to ensure that they can continue to enjoy free access to EU markets once the UK has left the bloc.
In a speech on Thursday, CBI director general Carolyn Fairbairn called for Britain to remain a member of the single market and the customs union until a free trade deal with the remaining 27 member states is finalised.
Speaking at the G20 summit in Hamburg, Mrs May said that she wanted to ensure that the UK continued to enjoy a good trading relationship with the EU.
However, she said that the country could not be a member of “every part of the customs union” and make its own trade arrangements with other countries outside the EU.
“What we will be discussing as part of our negotiations for the future arrangements is we do want to ensure that we can trade around the rest of the world,” she told Sky News.
“That means we can’t be members of every part of the customs union. But we want to continue to have tariff-free and as frictionless trade across borders as possible because we want to ensure that we have that good trading relationship with the EU.”
Her comments come as Brexit Secretary David Davis was preparing to meet senior business figures at Chevening House in Kent, the grace-and-favour country residence he shares with Foreign Secretary Boris Johnson and International Trade Secretary Liam Fox.
The talks were taking place amid mounting frustration among firms at the failure so far of ministers to spell out what arrangements will be put in place if there is no trade deal with the remaining 27 by the expected date of Britain’s withdrawal in March 2019.
In her speech, Ms Fairbairn said it was “impossible” to imagine a deal could be finalised that quickly and called for Britain to remain in the single market and the customs union until there was a trade agreement.
Such a “common sense” approach would, she said, avoid a “cliff-edge” break, with exporters suddenly faced with new tariffs and customs checks, and give firms the stability to carry on investing in the UK after Brexit.
Her proposal is likely to be treated with suspicion by hardline Brexiteers, who fear that prolonged transitional arrangements could be used by Remainers as a way of reversing the Brexit vote by stealth.
She set out her plan after the European Commission’s chief negotiator Michel Barnier rebuffed claims by Mr Davis that a free trade deal could deliver the “exact same benefits” as membership of the single market.
The Department for Exiting the EU has declined to give details of the Chevening talks, insisting that it is a private meeting.
Business leaders have been encouraged by the renewed willingness of ministers to engage with them, having felt shut out by the Government since Theresa May became Prime Minister last year.
At Westminster, the meeting is being seen as further evidence of Mrs May’s weakness following her General Election humiliation which saw her Commons majority wiped out.