Such a step would severely limit the UK’s ability to strike its own trade deals, but the Prime Minister’s Brexit advisers argue the move would limit a loss of trade with Europe after the exit from the EU, help address concerns about the north-south Irish border, and reduce the need for complex new customs procedures.
Three UK officials told the Financial Times the discussions are “live” in Whitehall.
Mrs May laid out in her Lancaster speech in January 2017 that Britain must not be tied to the EU’s customs union as membership would restrict the country from striking its own compressive trade deals with other countries.
One official close to the PM confirmed that the plan – which would take effect after a transition period of about two years following Brexit in March 2019 – was one option being considered.
The British official said: “If we can find a way of keeping goods in the customs union and retaining some independence on trade – particularly on services – we should look at it.”
Philip Hammond, Chancellor of the Exchequer, and Business Secretary Greg Clark are among ministers favouring a close customs relationship after Brexit.
But Liam Fox, the International Trade Secretary, ruled out British membership of any customs union with the EU after Brexit.
He denied reports that the Government is considering forming a new customs union with the bloc to allow tariff-free trade in goods after the UK leaves the EU.
In an interview with Bloomberg TV, he said: “It is very difficult to see how being in a customs union is compatible with having an independent trade policy because we would therefore be dependent on what the EU negotiated in terms of its trading policies and we’d be following behind that.
“We have to be outside of that to take advantage of those growing markets.
“One of the reasons we are leaving the European Union is to take control and that’s not possible with a common external tariff.”
However, Mrs May, when asked in an interview with Sky whether Britain could stay in a customs union with the EU, declined to rule it out.
She said: “What I want to do is ensure that we have got the best possible trade arrangements with China and with other countries around the world once we have left the European Union.”
A UK Government spokesman said: “We want to see the most frictionless arrangement as possible but also we need to have the freedom to sign trade deals across the world.”