Secret plans to allow an extension of the transition period in the Brexit withdrawal agreement could result in the UK living under all EU rules well beyond the 21 months so far negotiated, the Guardian can reveal.

The expected offer of an extension is designed to convince Arlene Foster, the leader of the Democratic Unionist party, that the “backstop” plan to avoid the creation of a hard border on the island of Ireland will never come into force.

A longer transition period would mean the whole of the country would be locked into a prolonged period of what EU diplomats have previously described as a state of “vassalage”, with the House of Commons being forced to accept Brussels regulations without having any say on them.

The revelation came as EU ambassadors were informed at a meeting on Friday evening that, following further concessions by the UK, good progress was being made on a Brexit deal in the negotiations and results could be made public as early as Monday should extra ground be made on the Irish border issue over the weekend.

Sabine Weyand, the EU’s deputy chief negotiator, told the 27 member states that the state of play would be assessed by the negotiating teams on Sunday evening. EU officials remain wary, however, that developments in the UK could still derail the deal.

In current plans, the backstop, under which the whole of the UK would stay in a customs union while Northern Ireland alone effectively stayed in the single market, would be enacted in December 2020 if a bespoke technological solution or trade deal could not be reached by then.

Foster has insisted she will not accept any Brexit deal under which Northern Ireland is treated differently to the rest of the UK.

Senior Brexiters, including the Commons leader, Andrea Leadsom, are understood to be planning to attend cabinet next week before deciding on whether to resign. There was alarm about the language used by Downing Street on Friday that Theresa May “would never agree to a deal that would trap the UK in a backstop permanently”. They were concerned, sources said, about any backstop proposal that risks the UK staying in the customs union without a clear date for exiting it.

The plan to include an extension clause in the withdrawal agreement would be a way to assuage concerns. It is being discussed privately by European commission and UK negotiators at the talks in Brussels. The length of any extension is yet to be agreed.

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It is likely that the UK would need to make additional budget contributions on top of its £39bn divorce bill to cover the extra time it would benefit from EU membership. It would not, however, have any representation in the bloc’s decision-making institutions.

Jean-Claude Juncker, the European commission president, expressed his confidence on Friday that a deal would be struck for the prime minister to sell back home.

“People who put all their chips on the hypothesis of no agreement are wrong; we must find an accord and I think we will find it,” he told Le Monde.

“We need to make substantial progress, which we’ll review next week,” Juncker added, referring to a leaders’ summit that will start on Wednesday night with a dinner at which Brexit will be the focus of the discussion.

A senior EU diplomat said that the Brexit secretary, Dominic Raab, could arrive at the European commission on Monday, should a deal be agreed during intensive talks over the weekend.

“Mr Raab has stated he might come to Brussels on Monday,” the diplomat said. “It all depends on progress still having to be made between now and that moment. The negotiating teams are back in their offices today discussing outcome of talks over the last few days.”

May asked in September last year for a transition period, which she optimistically described in her Florence speech at the time as a period of implementation of aspects of the future trade deal, including migration controls.

The prime minister had said it would be “limited” to a period of about two years. She had added that she did not believe the British people would “want the UK to stay longer in the existing structures than is necessary”.

Liam Fox, the international trade secretary, suggested soon after that he would only be open to an extension if it proved necessary to negotiate a trade deal.

The prime minister’s spokeswoman said on Friday: “When we published our plans in June on a UK-wide customs backstop, we were absolutely clear that the arrangement would be temporary, and only in place until our future economic relationship is ready.”

Mujtaba Rahman, a former Treasury and European commission official, and now head of Europe for the Eurasia Group risk consultancy, said an extra six months would be needed if only for a trade deal to be negotiated and ratified by all the member states’ parliaments.

“The UK has no choice but to ask for a mechanism to extend the transition, not least to further mollify the DUP,” Rahman said. “But doing so is also a recognition of reality: both the UK and the EU’s political leadership will change next year, meaning substantive trade negotiations are unlikely to begin until September 2019 at the earliest.”

Jacob Rees-Mogg, the chair of the European Research Group, said extending the transition “would not necessarily make the backstop redundant and would be very expensive” because of the expected additional contributions to the EU budget.