A group of senior pro-Brexit Conservative MPs and former ministers has delivered what has been described as "an ultimatum" to UK Prime Minister Theresa May over future customs arrangements with the EU.
The Remainers" preferred option of a "new customs partnership' would involve mirroring European Union tariffs on imports to avoid the need for customs posts.
As May met her divided "Brexit Cabinet" of senior ministers, 60 eurosceptic Conservative legislators argued that staying in a customs union with the EU would prevent Britain from striking new trade deals around the world.
A customs partnership- believed to be the preferred choice of chancellor of the exchequer Phillip Hammond- would see the United Kingdom collect European Union tariffs on the bloc's behalf on goods from outside countries and could go some way to addressing the Irish border problem.
The group's move came ahead of today's meeting of Theresa May's "Brexit war Cabinet", which is due to discuss the different options to replace membership of the EU customs union. One of those who spoke, on condition of anonymity, about the meeting, said there had been agreement that there were problems with both of the models under consideration.More news: São Paulo building collapses in huge blaze
Without a third way, both proposals are effectively "dead", the second United Kingdom official said.
International Trade Secretary Liam Fox told the meeting the customs partnership was "not compatible" with Brexit. However, another government official denied the scales have tipped, pointing to the presence of Chief Whip Julian Smith, not previously listed as a member of the war Cabinet, who now, the official said, is a member.
Business secretary Greg Clark is said to have been "close to tears" as he warned of the potential impact on jobs if the Government abandoned the customs partnership idea. Although he backed Remain in the 2016 referendum, the new home secretary has longstanding Euroskeptic tendencies and when it came to the crunch, he sided with May's opponents. Both are fundamentally split, with each side strong enough to block a plan, but not to push one through.
A Number 10 source said there was agreement in the Brexit strategy and negotiations sub-committee that Britain should leave the European customs union in order to be able to have control of its own trade policy.
He also flagged, however, that Ireland's participation in the single market meant that "goods entering Northern Ireland must comply with the rules of the Single Market and the Union Customs Code".
The EU does not appear to be keen on either option.