Theresa May has denied climbing down over membership of the customs union after Britain leaves the European Union.

The prime minister spoke after the Telegraph reported she was preparing for Britain to remain in the customs union after 2021 as the row over the Irish border continues.

She arrived at the EU western Balkans summit in the Bulgarian capital, Sofia, with the German chancellor, Angela Merkel, and the French president, Emmanuel Macron, following a meeting with the two leaders.

May said: “No, we are not [climbing down]. The United Kingdom will be leaving the customs union, we are leaving the European Union. Of course we will be negotiating future customs arrangements with the European Union and I have set three objectives; the government has three objectives in those.

“We need to be able to have our own independent trade policy, we want as frictionless a border [as possible] between the UK and the EU so that trade can continue and we want to ensure there is no hard border between Northern Ireland and Ireland.”

Downing Street sources earlier dismissed reports that the Brexit war cabinet had agreed that the UK would have to stay in the customs union for an extended period if there is to be is no hard Irish border.

The reports emerged as peers finally gave the EU withdrawal bill a third reading, but not before inflicting the fifteenth defeat on the government. The future of the bill is now uncertain, as the government tries to estimate the risk of irreversible defeats in the Commons.

With the cabinet still deadlocked over the best way forward on the future relationship with the UK’s biggest trading partner, pressure is mounting. Before the EU summit at the end of June, a way has to be found of satisfying EU negotiators that the UK proposals can avoid “backstop” solution of Northern Ireland remaining part of the EU’s trading arrangements.

According to the Daily Telegraph, ministers, including leading Brexiters Boris Johnson and Michael Gove, “reluctantly” accepted at Tuesday’s inner Brexit cabinet committee that there would have to be an extended period of membership of the customs union for the whole UK while the technology to monitor the border without imposing more permanent structures at the 270 crossing points that exist between Ireland and Northern Ireland.

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