Image copyright PA

Any interim deal between the UK and the EU should not be allowed to become "eternal", according to a key figure in the negotiations.

Guy Verhofstadt, the European Parliament's chief Brexit negotiator, said any "transitional arrangement" should have a strict time limit.

A House of Lords report has warned of significant tariffs and other barriers to trade unless one is adopted.

And Chancellor Philip Hammond has said an interim arrangement may be needed.

But other ministers have reportedly expressed reservations in private and ex-UKIP leader Nigel Farage told the BBC he feared talk of interim deals was part of "backsliding" and attempts to "delay" the Brexit process.

The UK is scheduled to begin official negotiations on the terms of its exit from the EU by the end of March, when Prime Minister Theresa May has said she will trigger Article 50.

From that moment, the rules say that Britain will have two years to agree a deal before it leaves the EU.

But getting an agreement on Britain's future trade with the EU may take much longer.

Media playback is unsupported on your device Media caption Interim agreement for the UK "certainly possible", EU negotiator Guy Verhofstadt tells The World At One

Ministers have hinted they could agree some kind of transitional process to avoid a shock to the economy, with Mr Hammond telling MPs on Monday that this could go some way to ensuring a "smoother transition".

Speaking on BBC Radio 4's The World at One, Mr Verhofstadt said a transitional deal was "certainly possible".

But he warned: "I have seen many times in politics that a so-called transitional agreement becomes an eternal, a definitive, agreement - that has to be avoided."

In a new report on the options for trade after Brexit, the House of Lords EU external affairs committee said the government should set out a clear plan at the start of negotiations, including specific proposals for what form any transitional deal could take.

Media playback is unsupported on your device Media caption Interim deal is described as "backsliding" by Nigel Farage, ex-UKIP leader, on The World at One

The peers said that staying in the EU customs union - a move opposed by many Conservative MPs - could be an important element of such a deal.

And they warned that if there were no transition, the UK would have to rely on World Trade Organization rules for its trading arrangements, which would mean British firms facing significant tariffs and other barriers to trade.

BBC assistant political editor Norman Smith said Downing Street was insisting a transitional deal would not be part of a "softening up process" to prepare people for the UK being "entangled" with the EU for years to come.

He added that there was a "tension" between ministers who want to leave the EU first before negotiating, and those like Mr Hammond who think this would be "profoundly risky".

Former Conservative minister Anna Soubry told BBC Radio 4's Today programme a transitional arrangement would offer "real benefits", saying the alternative would involve the UK "dropping off the cliff edge".

She said she and her fellow Remain campaigners accepted the Brexit vote and that it was time for both sides to "come together".

Her fellow Conservative Peter Lilley was more cautious about the prospects of a transitional deal, saying that negotiating one could take as long as reaching a permanent agreement.

Mr Lilley said there was "no reason" the UK could not secure a free trade arrangement with the EU without having to continue with the free movement of people.

Image copyright PA Image caption Many Tory MPs argue it is not in the interest of EU countries to impose tariffs

Brexit minister David Jones was asked about the possibility of a transitional arrangement as he arrived at an EU summit in Brussels.

"What we've always said is that we don't want to have a disruptive end to Britain's participation in the EU," he said, adding that a "smooth withdrawal" was the government's goal.

But the Leave Means Leave campaign said: "A transitional deal is absolutely unnecessary and poses a huge threat to the UK economy."

It said such an arrangement would involve the UK paying "extortionate sums of money to the EU" and would cause "serious uncertainty".

The government has committed itself to publishing some form of plan before it notifies the EU of its intention to leave but it is unclear how detailed this will be.

Business has expressed concerns about the impact of a "cliff-edge" departure from the EU, leading to speculation about temporary measures to soften the blow - including paying to retain tariff-free access to the single market.

Labour stance

In a speech at Bloomberg in London, shadow Brexit secretary Sir Keir Starmer said Labour could amend any bill giving the government authority to trigger Article 50 in order to avoid a so-called "hard Brexit" involving quitting the EU single market.

He insisted this could be done without delaying the Brexit process.

Sir Keir said Labour wanted to see tariff-free trade for UK businesses, no new "bureaucratic burdens", protection for the competitiveness of the services and manufacturing sectors and for workplace protections to be maintained.

Image caption Keir Starmer is Labour's Brexit spokesman

He also said Labour should not fall into the "trap" of trying to "frustrate" Brexit, saying the stance adopted by the Liberal Democrats - who are promising a second referendum on the terms of the exit package - "cannot heal the rift in our society".

In response, the Conservatives said Labour supported the government's Brexit timetable in public, "but behind closed doors they talk about second referendums and now seek to attach conditions and tie the government's hands".