Theresa May is under pressure to spell out her vision for the UK’s future trading relations after a cabinet split emerged on whether the country should remain part of a customs union with the EU.

The prime minister did not rule out such an arrangement, which would limit Britain’s ability to reach free trade agreements with non-EU countries, but failed to say what she thought should happen.

She is facing calls to clarify the government’s position after the Financial Times reported on Friday that the chancellor, Philip Hammond, and the business secretary, Greg Clark, favoured staying in a customs union for goods.

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The international trade secretary, Liam Fox, was quick to slap down the idea, saying the government was not considering such an arrangement with the EU. He insisted it would restrict the UK in forging trade deals with the rest of the world.

His comments poured cold water on reports that the government was considering a deal under which trade in goods would be covered by a customs union arrangement, while the UK would retain independent policy on services.



Speaking to Bloomberg TV in China on the final day of the prime minister’s three-day visit, Fox said being part of a customs union would prevent Britain from setting trade regulation.

“It is very difficult to see how being in a customs union is compatible with having an independent trade policy, because we would therefore be dependent on what the EU negotiated in terms of its trading policies, and we’d be following behind that,” he said.

Quick guide What are Brexit options now? Four scenarios Show Hide Staying in the single market and customs union The UK could sign up to all the EU’s rules and regulations, staying in the single market – which provides free movement of goods, services and people – and the customs union, in which EU members agree tariffs on external states. Freedom of movement would continue and the UK would keep paying into the Brussels pot. We would continue to have unfettered access to EU trade, but the pledge to “take back control” of laws, borders and money would not have been fulfilled. This is an unlikely outcome and one that may be possible only by reversing the Brexit decision, after a second referendum or election. The Norway model Britain could follow Norway, which is in the single market, is subject to freedom of movement rules and pays a fee to Brussels – but is outside the customs union. That combination would tie Britain to EU regulations but allow it to sign trade deals of its own. A “Norway-minus” deal is more likely. That would see the UK leave the single market and customs union and end free movement of people. But Britain would align its rules and regulations with Brussels, hoping this would allow a greater degree of market access. The UK would still be subject to EU rules. The Canada deal A comprehensive trade deal like the one handed to Canada would help British traders, as it would lower or eliminate tariffs. But there would be little on offer for the UK services industry. It is a bad outcome for financial services. Such a deal would leave Britain free to diverge from EU rules and regulations but that in turn would lead to border checks and the rise of other “non-tariff barriers” to trade. It would leave Britain free to forge new trade deals with other nations. Many in Brussels see this as a likely outcome, based on Theresa May’s direction so far. No deal Britain leaves with no trade deal, meaning that all trade is governed by World Trade Organization rules. Tariffs would be high, queues at the border long and the Irish border issue severe. In the short term, British aircraft might be unable to fly to some European destinations. The UK would quickly need to establish bilateral agreements to deal with the consequences, but the country would be free to take whatever future direction it wishes. It may need to deregulate to attract international business – a very different future and a lot of disruption.

Asked if he was ruling out any form of customs union in future, Fox said: “We have to be outside of that to take advantage of those growing markets. One of the reasons we are leaving the European Union is to take control and that’s not possible with a common external tariff.”

May was more vague about the government’s intention. “What I want to do is ensure that we have got the best possible trade arrangements with China and with other countries around the world once we have left the European Union,” she told Sky News on Friday.

“I do want to do those free trade agreements. There is more trade that we can do even before we get to those free trade agreements.”



A No 10 spokesman was later pressed on what May thinks about being part of a customs union with the EU in the long term but muddied the waters further. He said she had an “open mind” to the kind of customs arrangement the UK has with the EU after Brexit and the implementation period.

He also said Fox had been speaking for the government and confirmed that May was sticking by her statement from her Lancaster House speech that the UK intends not to be bound by the common external tariff after leaving the EU. This would rule out the UK being part of a customs union.

The split comes at a time when May’s leadership is under pressure both from eurosceptics who worry she is moving towards a softer Brexit and backbenchers who worry that leaving the EU is distracting the prime minister from building a strong domestic agenda.

Fox claimed on Friday that the successful visit to China should silence her backbench critics. “Theresa May’s middle name is resilience,” he told Bloomberg. “And that’s exactly what she’s showing ... I do wish more people could have seen the commitment she was showing to Britain’s national interest on this trip to China.”

May also avoided questions about her future. Asked by Sky News whether she planned to deliver her vision of Brexit into the next election, she said: “That’s what I’m doing here in China. I’m getting on with delivering on exactly what the British people want us to do.”

In an interview with the BBC, May repeated her assertion that she was not a quitter, but pointedly used the past and present tense in relation to her role as prime minister, not the future tense.

In answer to the question: “Do you want to be the Tory leader at the next general election?” she replied: “I’ve been asked this question on a number of occasions. I’ve said very clearly throughout my political career: I’ve served my country and I’ve served my party. I’m not a quitter.

“I’m in this because there is a job to be done here, and that’s delivering for the British people and doing that in a way that ensures the future prosperity of our country.”