Insiders said ministers remain bitterly divided over the proposals with several doubting such a deal could command a majority in parliament or survive amendments from furious backbenchers. One senior Cabinet member suggested as few as 90 Tory MPs would support any withdrawal agreement involving a customs union and warned it would spark a new round of ministerial resignations.
Foreign Secretary Jeremy Hunt is understood to be among those most fiercely opposed to a customs union with International Trade Secretary Liam Fox and Commons Leader Andrea Leadsom also determined to block the idea.
But a source said Environment Secretary Michael Gove and Mrs May’s chief whip Julian Smith were still trying to talk Cabinet colleagues into accepting a deal with Labour may be the only path to delivering Brexit.
Mrs May said she had an “open mind” on a deal to be done with Labour.
She told a Commons liaison committee yesterday: “There are differences on issues but on many of the key areas – particularly on the withdrawal agreement – there is common ground.”
It is understood the proposal would inolve Britain’s entry into a customs arrangement with the EU which would see the alignment of all tariffs on goods within the EU and allowing it to negotiate trade deals on the UK’s behalf.
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8.30am update: Lloyds warns of Brexit uncertainty
Lloyds Banking Group has warned ongoing Brexit uncertainty could take a further toll on the UK economy.
The high street banking giant reported flat statutory pre-tax profits at £1.6 billion as it revealed a further £100 million charge for the payment protection insurance (PPI) scandal after a surge in complaints ahead of the deadline.
But despite fears over Brexit uncertainty and its impact on the economy, Lloyds said it remained on track for the full year.
Chief executive Antonio Horta-Osorio said: “While Brexit uncertainty persists, and continued uncertainty could further impact the economy, I remain confident that our unique business model, and in particular our market-leading efficiency and targeted investment, will continue to deliver superior performance and returns for our customers and shareholders.”
The group said it now does not expect another interest rate rise until next year at the earliest as Brexit worries hold back business spending and the deal outcome remains unclear given the recent six-month delay to the EU departure.
7.30am update: Theresa May braced for local election misery
Theresa May faces local elections today amid controversy over an ongoing Brexit delay and a Cabinet sacking.
Elections are taking place in 248 English councils outside London, and 11 local authority areas in Northern Ireland.
There are also polls for six elected mayors in Bedford, Copeland, Leicester, Mansfield, Middlesbrough and the new North of Tyne devolved regional authority.
The poll comes as the Prime Minister has faced criticism for pushing back the Brexit date to October 31, and is embroiled in fresh controversy after dismissing Gavin Williamson as defence secretary after an inquiry into leaks from the National Security Council.