The prime minister is said to have asked for her two existing options to be revised in a bid to find a consensus following a meeting of her Brexit “war cabinet”.
It means that with five months to go until a Brexit deal is supposed to be set, the UK still has no clear position on exactly what kind of customs arrangements it wants with the EU after withdrawal.
In a bid to preempt the deadlock, Downing Street had hinted ahead of Wednesday’s meeting that the prime minister’s thinking on customs options was “evolving” from the two options she had already set out.
Up to now Ms May has proposed two options – a “customs partnership”, which favours closer customs ties with the EU to avoid a hard border in Ireland, or a “streamlined arrangement” with looser customs ties, but a harder border.
The prime minister is yet to name her preferred option, though she and Philip Hammond, the chancellor, are thought to favour the partnership plan – which is hated by Brexiteers who see it as too close to the UK’s current customs position.
The Independent was told that at the meeting on Wednesday, the defence secretary, Gavin Williamson, raised “grave concerns” over the partnership plan, while the new home secretary, Sajid Javid, is also said to have spoken against it.
With the overall balance of the cabinet six to five against the proposal, one source said Brexiteers now believe they have “killed” the option.
But in a sign that Ms May is not ready to let go of it, the prime minister asked for more work to be done on both of her existing proposals.
The partnership plan would see Britain collect tariffs on the EU’s behalf at ports and airports, passing on a share of the money to Brussels – then if the UK sets different tariffs from the EU, traders would claim refunds from HMRC for goods that stay in Britain.
Olly Robbins, Ms May’s Europe adviser, regards the partnership as a means of avoiding a hard border in Ireland, while keeping the UK out of the European customs union. Close aides of Ms May have also called it “intellectually perfect”.
But Downing Street has been privately warned that the customs partnership proposal could collapse the government, with the Brexit-backing European Research Group having organised a critical report backed by 60 MPs.
The group’s chairman, Jacob Rees-Mogg, has called the proposal “cretinous”, “deeply unsatisfactory” and argued that it would “not get us out of the European Union, which is what people voted for”.
The other option, a “streamlined arrangement”, is viewed more favourably by Brexiteers in both the cabinet and on the back benches.
It is known as “maximum facilitation”, or even “max fac”, and would see the UK outside any customs union, but with some controls at the border between Northern Ireland and the Irish Republic.
Backers say a “trusted trader” scheme and remote monitoring of the border would limit physical infrastructure.
But it would still essentially mean a hard border on the island of Ireland and critics claim this would break the Good Friday Agreement, risking peace in Northern Ireland.
When Ms May was challenged in the Commons on the two options earlier in the day, she responded that there are “a number of ways” of delivering on the government’s commitments.
Asked whether this meant that more than two options were now on the table, her official spokesman said: “Work has been ongoing on two options. That work has been proceeding. Ideas are obviously evolving as we go along.”
The European commission has been pushing back against all of UK proposals, with reports that Brussels regards both as unworkable.
EU officials have said they want a solution for the Irish border, and in turn customs arrangements, by its forthcoming summit in June.
Failure to come up with an agreed plan could leave the UK forced to fall back on the European commission’s “backstop” option, which would effectively keep Northern Ireland in the EU’s customs union and see a customs border drawn down the Irish Sea.
Ms May has insisted that no British prime minister could accept such a scenario, and the DUP which props up her government’s Commons majority have said they will not countenance it.