Quitting EU's customs union will mean trade barriers "unavoidable," insists Michel Barnier

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Downing Street stressed how the UK wants a future customs arrangement with the EU to be “as frictionless as possible,” which it believes is possible because it would be in both parties’ interests to achieve it.

In an attempt to eradicate confusion over the UK Government’s position on the customs union, No 10 has “categorically” ruled out remaining in the or a customs union with the EU after withdrawal, prompting David Davis, the Brexit Secretary, to insist Britain's position is "perfectly clear" on the issue.

However, after a three-course lunch of smoked salmon, pork belly and vanilla custard tart, Mr Barnier told the UK the "time has come to make a choice".

He stressed that during the two-year transition period the conditions were very clear; “everyone has to play by the same rules," adding: "The certainty about this transition will only come with the ratification of the withdrawal agreement."

The EU’s chief negotiator, who earlier said the negotiators had “not a minute to lose,” also called for clarity from the Government on what it wanted from a future partnership between the UK and the EU.

"The only thing I can say, without a customs union and outside the single market barriers to trade on goods and services are unavoidable,” he declared.

Mr Davis said the UK wanted a comprehensive free trade agreement while still having the opportunity to make deals across the rest of the world.

"It's perfectly clear what we want to do. There's no doubt about it, we are leaving the customs union but we are aiming for a good future for Britain," insisted the Secretary of State.

Confirmation of the Government's approach on the customs union will to some extent placate Tory MPs and ministers who are keen for a Brexit arrangement which allows the UK to strike trade deals around the world; something which being part of a customs union prevents.

But business leaders have urged the Government to remain in a customs union, and Tory Brexit rebel Anna Soubry urged Number 10 to "do the maths" and listen to them.

She claimed the "hard Brexit" European Research Group of Tory MPs, led by Jacob Rees-Mogg, had a "deeply unattractive" plan which involved leaving the customs union "to chase unicorn trade deals" at the expense of existing relations with the EU.

Mr Davis said the Barnier talks, which the Prime Minister dropped in on, had been "very constructive" and the next round would focus on the implementation period.

An "intense" period of negotiations will begin straightaway and the Government was "confident" of securing an agreement at the next meeting of EU leaders in March, added the Secretary of State.

But the ruling out of any future customs union alarmed some.

Tom Brake for the Liberal Democrats said: "The idea that the UK will not be in the, or any, customs union confirms that the crazed, extreme Brexiteers are now in control of the Government.”

The SNP’s Stephen Gethins said Downing Street’s move on the customs union showed the “Tories are putting party before country and that is reckless and irresponsible”.

Frances O’Grady, the TUC General Secretary, said: “By ruling out a customs union, the Government is choosing to put up barriers to UK trade with Europe. It will be bad for jobs, bad for investment and bad for business.

“The Prime Minister must break free of the Brexit extremists in her party and put working people first. The best way to protect jobs, investment and rights at work is through the single market and customs union,” she added.