SOFIA (Reuters) - Prime Minister Theresa May said on Thursday Britain would leave the EU customs union after Brexit but a source said London was considering a backstop plan that would apply the bloc’s external tariffs beyond December 2020.

Anti-Brexit demonstrators wave EU and Union flags outside the Houses of Parliament in London, Britain, January 30, 2018. REUTERS/Toby Melville

Asked about reports that London would ask to stay in the European Union’s customs area beyond the end of a post-Brexit transition period in 2020, May denied she was “climbing down” on plans to leave.

“No. The United Kingdom will be leaving the customs union as we’re leaving the European Union. Of course, we will be negotiating future customs arrangements with the European Union and I’ve set three objectives,” May told reporters on the sidelines of an EU summit in the Bulgarian capital Sofia.

She said the objectives were that Britain should have its own trade policy with the rest of the world, should have frictionless trade with the EU and that there be no hard border with EU member Ireland.

In talks with European Commission President Jean-Claude Juncker and European Council President Donald Tusk, she reiterated her view that a backstop agreement put forward by Brussels to prevent a hard border was “unacceptable”.

“The prime minister said the UK would shortly put forward its own backstop proposal in relation to customs,” her spokeswoman said.

Earlier, the source, who is familiar with the discussions, said on condition of anonymity the government was trying to find a way to make the backstop arrangement more acceptable to Britain rather than seeking an extension of a transition period.

The source said Britain could apply the EU’s external tariffs for a limited period beyond December 2020 in the case of a delay in the implementation of any Brexit deal.

May’s spokeswoman said negotiations on the backstop arrangement were continuing, and that Britain did not want or expect to have to use it.

May has been struggling to unite her cabinet over the terms of Britain’s divorce with the EU, with a row over future customs arrangement dividing her government and all but stalling Brexit negotiations.

EU leaders meeting May in Sofia on Thursday were “in listening mode” and hoping for reassurances from her, said one official, before a formal summit in June when the sides want to mark another milestone in the negotiations.

That is needed to seal a final divorce deal in October, leaving the EU enough time to ratify it by Brexit day in March 2019.

Britain otherwise risks crashing out of the bloc, a scenario that could hurt the economy and disrupt people’s lives.

UNDER PRESSURE

The EU says this schedule is coming under pressure as there has been not enough progress in the negotiations in recent months, most importantly on how to avoid physical controls on the border between the Irish Republic and the British province of Northern Ireland.

“It is an absolute red line for us that there could not be a hard border on Ireland,” Irish Prime Minister Leo Varadkar told reporters in Sofia.

If no better ideas emerge, the bloc wants the backstop clause under which it would go on regulating trade in Northern Ireland after Brexit to prevent a hard border. Both sides fear a return of border controls could reignite the violence that afflicted Northern Ireland until a peace deal in the late 1990s.

“We have a text which is the Irish backstop ... and we need that to be part of the withdrawal agreement. And if it is not part of the withdrawal agreement, then there will be no withdrawal agreement,” Varadkar said.

Under such a scenario, Britain would not be given the adaptation period from next March to the end of 2020, but go straight into being out of the EU with little detail agreed on how to handle its ties with the bloc.

May has said as it stood in March, the EU’s backstop was unacceptable because it would cut off Northern Ireland from the rest of the United Kingdom.

The source said extending the use of EU tariffs was part of discussions to make the backstop arrangement more palatable to Britain, and could be triggered if there were a delay in the ratification of the Brexit deal or if there were problems introducing new technology at the border.

At home, May has to balance the demands of Brexit supporters against those ministers who want to keep the closest possible ties to the EU, and any hint that Britain could stay within the customs union has become a flashpoint.

The EU says that would be the best way to avoid a hard Irish border.

“If we are not making real substantial progress by June then we need to seriously question whether we are going to have a withdrawal agreement at all,” Varadkar said.