Theresa May will propose to the European Union that Britain could stay in the customs union for years after Brexit to allow more time for finding a solution to the Irish border dilemma.

The "backstop" proposal is the prime minister's latest attempt to unlock Brexit talks ahead of the European Council summit next month.

However, Ireland's Leo Varadkar told May that Britain must also stay aligned with the single market for there to be no physical infrastructure on the border between Northern Ireland and the Republic.

The EU also will not accept May's request that the backstop is time-limited, meaning Britain could be in EU institutions for decades, a Brussels source tells Business Insider.

EU Council President Donald Tusk supports Varadkar's position.

LONDON — European leaders have warned Theresa May that her new proposal for avoiding a hard border with Ireland would be unacceptable in its current form, potentially scuppering any Brexit deal.

The prime minister is set to say to the European Union that Britain is prepared to stay fully aligned with the customs union for a "time-limited" period beginning once the proposed 20-month transition period comes to an end.

The proposal — signed off by May's Brexit war Cabinet this week — is designed to give the UK government, civil servants and businesses more time to prepare for Britain's exit from the single market and customs union.

It is an alternative to the "backstop" put forward by the EU last year, in which Northern Ireland would remain fully aligned to the customs union and single market after Brexit until a solution for avoiding a hard border is found.

However, Ireland's prime minister, Leo Varadkar, said yesterday that although May's new idea was a sign of progress, Britain would ultimately need to remain fully aligned with single market rules for the invisible border between Northern Ireland and the Republic to be preserved.

"Any move on customs with the UK would be welcome but I need to be very clear that avoiding a hard border between Northern Ireland and Ireland is about more than customs," the Taoiseach told reporters after a meeting with May in Bulgaria on Thursday.

"The single market and aspects related to regulation are important as well."

Varadkar said earlier on Thursday that he was now "seriously" questioning whether a deal could go ahead. "We need to seriously question if we’re going to have a Withdrawal Agreement," he told reporters.

May reportedly received a cautious response to her new proposals from European Council president Donald Tusk.

One EU official told the Guardian that Tusk insisted EU leaders would support Ireland's position.

"We had to say [to May] it was too early to tell. All the news coming from London is very disorientating. Tusk was clear that it is not only about what the commission might recommend.

"They have to get all 27 member states to agree, and that includes Ireland. And Tusk is squarely behind Dublin." Theresa May pictured with European Council President, Donald Tusk. Neil Hall/Reuters

Following Varadkar's remarks, The Sun reports that EU officials will tell Britain to simply extend the transition period until it has found a way of avoiding physical infrastructure on the Irish border.

Under this plan, Britain would remain in the single market, customs union and jurisdiction of the European Court of Justice for as long as it takes for the UK government to solve the Irish dilemma.

Figures in Brussels are opposed to the UK's suggestion that the backstop should be time-limited because, in theory, this means Britain could drop out of the customs union without an Irish solution being in place.

A senior EU source has told Business Insider that the Commission will include a clause in the Withdrawal Agreement to ensure that the backstop will only cease once Britain has found a way of avoiding a hard border.

The EU is also keen to stress that Britain will only be able to remain in the single market beyond transition — as Varadkar suggested — if it adheres to its four freedoms, including the free movement of people.

Meanwhile, May's Cabinet is still trying to decide which model — "max-fac" or the customs partnership — is the most feasible way of avoiding a hard border. The EU has already rejected both.

Brussels figures are reportedly privately joking that the "max-fac" model could take 65 years to put together, meaning Britain could be in transition until the back-end of the 21st century.

The "max-fac" idea seeks to eliminate friction on the border through various technologies. However, the technology required to facilitate a frictionless border currently does not exist, with only minimal friction being possible.