Jean-Claude Juncker has ruled out the central plank of Theresa May’s Chequers proposals and scorned the British government’s plans to build a rival to the EU’s Galileo satellite project, in a downcast reading of the Brexit negotiations in his annual state of the union speech.

The European commission president said Brussels would not let the UK enjoy the benefits of an internal market on goods, and that if negotiators failed to find an agreement on a deal it would not be the fault of the commission.

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“We respect the British decision to leave our union, even though we continue to regret it deeply,” Juncker said in his speech to MEPs in Strasbourg. “But we also ask the British government to understand that someone who leaves the union cannot be in the same privileged position as a member state.

“If you leave the union, you are of course no longer part of our single market, and certainly not only in the parts of it you choose.”

He said of the EU’s chief negotiator: “Michel Barnier stands ready to work day and night to reach a deal … It will not be the commission that will stand in the way.”

Juncker offered May some warm words in response to her calls for an unprecedented deal, telling MEPs he agreed with “the statement made in Chequers that the starting point for such a partnership should be a free trade area between the UK and the EU”.

In a deal proposed earlier in the year, the EU had suggested trade in goods should be free of tariffs, a move May has insisted would not be sufficient to maintain economic wellbeing on both sides of the Channel and Irish Sea.

In comments that positively moved the pound on the currency markets, Juncker said: “The United Kingdom will never be an ordinary third country for us. The United Kingdom will always be a very close neighbour and partner in political, economic and security terms.”

However, his tone was generally gloomy and he issued warnings over a no-deal exit and the Irish border issue, which has proved to be the biggest obstacle to an agreement.

Juncker said the EU would not let Ireland down in negotiations to avoid a hard border with Northern Ireland. The UK agreed last December and in March this year to sign up to a “backstop” solution to prevent such a border emerging in any scenario after Brexit, but the government has ruled out EU proposals that in effect would keep Northern Ireland in the single market and customs union, and it is yet to offer a workable alternative, according to Brussels.

Quick guide Will the Chequers agreement survive? Show Hide Who dislikes the Chequers agreement and why? Noisiest in their opposition are Tory Brexiters, not least David Davis and Boris Johnson, both of whom quit the cabinet in protest. They argue that the promise to maintain a common rulebook for goods and other continued alignment will mean a post-Brexit UK is tied to the EU without having a say on future rules, rather than being a free-trading independent nation. Labour has also disparaged the proposal, expressing deep scepticism about the so-called facilitated customs arrangement system. What about the EU? Brussels has sought to stay positive, but has deep concerns about elements of the plan viewed as overly pick-and-mix, and thus potentially incompatible with EU principles. Michel Barnier, the EU’s chief Brexit negotiator, says he opposes both the customs plan and the idea of alignment for goods. He also makes plain his contention that the Chequers plan contains no workable idea for the Ireland-Northern Ireland border. But at the same time the EU has been careful to not entirely dismiss the proposals, raising the possibility it could accept some adapted version. Who supports the agreement? Officially, May and her cabinet, though even here the backing can seem lukewarm at times. Asked about Chequers, the home secretary, Sajid Javid, said it was the government’s plan “right now”, indicating alternative ideas could be considered. Is it doomed? Even May’s allies concede it will be a hugely difficult task to get the plan through parliament. Damian Green, the PM’s close friend and former de fact deputy, described the process as “walking a narrow path with people chucking rocks at us from both sides”. On the remain side of the Conservatives, the former education secretary Justine Greening called the Chequers plan “more unpopular than the poll tax”, saying May should start again from scratch. If anything can save the plan – and it’s an outside shot – it will be a combination of the hugely tight timetable and the fact that, as yet, no one else has yet produced a plan with a better chance of being accepted by parliament. What happens next? On 20 September, an informal gathering in Salzburg, Austria, will provide a snapshot of current EU thinking. Then, 10 days later, the Conservative conference could show the Chequers plan is holed below the waterline. If it survives these tests, the proposals will then reach the crucial EU summit Brussels on 18 October, with something final needed, at the very latest, in the next two months. PETER WALKER

Urging the UK to live up to the commitments it had made, Juncker said: “The European commission, this parliament and all other 26 member states will always show loyalty and solidarity with Ireland when it comes to the Irish border.

“This is why we want to find a creative solution that prevents a hard border in Northern Ireland … It is not the European Union, it is Brexit that risks making the border more visible in Northern Ireland.”

May told the Commons on Wednesday she believed Juncker’s comments were positive. “I note that President Juncker said that the UK ‘will never be an ordinary third country’,” she said. “Let me be very clear, when we leave the EU we will be an independent sovereign nation with control of our money, laws and our borders. I want to say to our closest allies in Europe, you will also never be an ordinary third party for us,” she said.

May also said the government would not accept a situation of a so-called “blind Brexit” where the UK agrees a withdrawal arrangement in March alongside a vaguer statement of intent for the future relationship to be thrashed out over the transition period.

According to a commission release of the speech, Juncker had been due to issue a warning to May that the EU would be “very outspoken should the British government walk away from its responsibilities under the Good Friday agreement”, the Northern Ireland peace treaty. In the event, he did not make the threat.

Juncker did, however, scorn claims from the British government that it would go it alone and build its own satellite if the EU did not allow UK industry and its military to have continued access to the bloc’s Galileo programme after Brexit.

“It is our Galileo programme that is today keeping Europe in the space race. No single member state could have put 26 satellites in orbit, for the benefit of 400 million users worldwide. No single member state could have done this alone,” he said.

The UK government has contributed over £1.2bn to the Galileo satellite navigation system, which is intended to rival the US-controlled global positioning system. Once fully operational in 2020 it will provide accurate position, navigation and timing information to be used by governments, citizens, industry and the military.

The EU has ruled out the continued involvement of the British space industry after Brexit as it is a benefit reserved for member states.

Elsewhere in his speech, Juncker unveiled plans to strengthen the EU’s coastguard and asylum agency to police Europe’s outside borders and speed the deportation of migrants illegally staying in the EU.

A standing corps of 10,000 staff, including guards and migration experts, is expected to be up and running by 2020, and they would be given powers to check ID papers and stamp travel documents, detain people who are crossing the border without authorisation, and help ensure those not eligible are deported.