The British government is considering staying aligned to the EU's customs union for years after a post-Brexit transition period if it cannot resolve the Irish border issue, newspaper reports said Thursday.
London is reportedly ready to offer this option as an alternative "backstop" to the European Union's proposal that Northern Ireland alone would stay aligned if no way was found to avoid border checks with the Republic of Ireland.
Britain has vowed to leave the EU's single market and customs union after Brexit, which legally takes place on March 29, 2019, but in effect will be delayed by a transition period lasting until December 31, 2021.
The plans have raised the prospect of border checks with EU-member Ireland, which many fear could upset the fragile peace in the region.
London has in theory agreed that if no solution can be found to keep the border open, Northern Ireland would be aligned with the EU as a last resort -- but this would break up the country and in reality would never be acceptable.
Under the plan reported in The Times and The Telegraph, the government's new "backstop" would see the whole country remain aligned with the EU.
The Telegraph reported that Prime Minister Theresa May's top ministers signed off on the plan on Tuesday, and The Times said it would be presented to the EU next week.
"We agreed in December and in March to a backstop, but the subsequent legal text that was put forward by the EU we believe was unacceptable," May's spokeswoman said.
"Negotiations are continuing on what a workable backstop would be."
May's government has yet to agree on its plans for future customs arrangements with the EU and there are growing fears that any option will not be ready by the end of the transition period.
The idea of extending the transition has been mooted in recent weeks by May's former chief of staff Nick Timothy, her former deputy Damian Green, and business secretary Greg Clark.
Downing Street has repeatedly said that Britain will be leaving the customs union after the transition, and May said on Thursday: "The United Kingdom will be leaving the customs union."
The suggestion of a "softer" Brexit lifted the pound overnight, according to Jasper Lawler, head of research at London Capital Group, an online trading platform.
"Should the report be confirmed as true then this rally could have a lot further to go, but right now traders are awaiting some form of confirmation."
But hardline eurosceptics are unhappy, with leading Conservative MP Jacob Rees-Mogg telling the Telegraph: "People voted to leave, they did not vote for purgatory."
The government has promised to reduce as much as possible any border checks on goods going in and out of the EU and avoid a "hard border" in Ireland.
Britain also wants to be able to forge its own trade deals with non-EU countries.
Ministers are divided and any option would take time to implement.
The Telegraph reported that one of the options gaining support, using technology to ease border checks, may not be in place until 2023.