EU leaders are considering a compromise over Brexit that would allow Britain access to the single market for goods while ending freedom of movement of people.

In the first sign of divergence between EU member states and Brussels’ chief negotiator Michel Barnier, leaders are expected to sound out Theresa May about a compromise at a summit in Salzburg next month.

However, the deal would come at a price, as it would involve Britain accepting all future EU environmental and social protections - which Eurosceptics say is “not Brexit”.

Downing Street is understood to be cautiously optimistic that leaders of the EU27 countries are finally engaging with Mrs May’s Chequers plan for Brexit after Mr Barnier had previously dismissed it as unworkable.

The European Commission declined to comment on the plan, but did not deny that member states “may be discussing it”.

Until now, Mr Barnier has insisted that Britain cannot “cherry pick” parts of EU membership, such as access to the single market, while rejecting others, such as freedom of movement.