Theresa May. Picture: REUTERS
Theresa May. Picture: REUTERS

British Prime Minister Theresa May's office has dismissed as "speculation" a newspaper report that suggests an all-UK customs deal will be written into the legally binding agreement governing Britain's withdrawal from the EU.

The Sunday Times said the plan would resolve the vexed issue of the Irish border, which is the main stumbling block in the Brexit talks, by avoiding the need to treat Northern Ireland differently from the rest of the UK.

With just five months to go until it exits the EU, Britain's divorce talks are at an impasse, fuelling huge uncertainty among businesses and causing the value of sterling to see-saw on any news about a possible breakthrough in the talks.

Reuters reported on Friday that the EU has suggested a backstop post-Brexit customs arrangement that would cover all of the UK. This could give mainland Britain some scope to set trade rules while keeping the province of Northern Ireland aligned with the EU.

British housing minister James Brokenshire said on Sunday there is still an issue around Northern Ireland in the Brexit talks, referring to a yet-to-be finalised backstop arrangement, which would prevent a hard border between Northern Ireland and EU member Ireland if no better solution can be found. "That very much remains our focus and attention in getting that deal," he told the BBC.

Asked about the Sunday Times report, a spokesperson at May's office said: "This is all speculation. The prime minister has been clear that we are making good progress on the future relationship and 95% of the withdrawal agreement is now settled and negotiations are ongoing."

The Sunday Times said that May's cabinet would meet on Tuesday to discuss her plan and that she hoped there would be enough progress by Friday for the EU to announce a special summit.

EU diplomats  said on Friday they doubt a deal can be completed in time for a tentatively scheduled summit on November 17 and 18, but it could  happen a week later.

Cabinet support for any exit agreement is crucial for May, whose ruling Conservative Party is deeply divided over Brexit. Some of  May's MPs want to oust her.

May's  minority government relies on the support of Northern Ireland's Democratic Unionist Party (DUP) to get legislation through parliament. The DUP has vowed to scupper any deal that treats Northern Ireland differently from the rest of the UK.

If she fails to win cabinet and parliamentary support for any deal, Britain faces the prospect of an unstructured Brexit, leaving the EU without any formal arrangements for trade, immigration and many other issues.

More than 70 business figures are calling for a public vote on the final terms of Britain's exit from the EU, warning that the country faces "either a blindfold or a destructive hard Brexit", The Sunday Times also reported.