THERESA May today risks stoking resentment in Brussels as she proposes Britain having a "close association" with the EU's customs union while being able to negotiate its own trade deals with other countries.

Critics at home said the Conservative Government was “returning to the fantasy of having our cake and eating it on the customs union”.

The Prime Minister, in one of several "partnership papers" to be published in the coming weeks, insists the proposed new customs arrangement would "facilitate the freest and most frictionless possible trade in goods between the UK and the EU" and avoid chaos at Britain’s borders.

But the EU would oppose any plan for Britain to be “half in” the customs union – membership of which bars any separate trade deals – while negotiating agreements with the likes of America, Canada, India, Japan and Australia.

Michel Barnier, the EU's chief negotiator, has already made clear frictionless trade outwith the EU customs union is "not possible”.

Today, the Department for Exiting the EU (DExEU) will announce its intention to seek an “interim period with the EU of close association with the customs union that would allow for a smooth and orderly transfer to the new regime”.

One possible approach would be a temporary customs union between the UK and the EU.

“This time-limited period of implementation will provide certainty for businesses in the UK and the EU and would ensure that businesses only have to adjust once to a new customs relationship,” it said.

Crucially perhaps, the Department stressed during the interim period, the length of which is not disclosed but could be up to three years, Britain would “look to negotiate bold new trade relationships around the world”.

DExEU claimed agreeing the interim period with Brussels would provide the necessary time for the UK and EU to implement future customs arrangements and put in place “facilitations and technology-based solutions” to make the customs regime as smooth as possible for importers and exporters.

UK business welcomed the Government’s proposal.

Josh Hardie, the CBI’s Deputy Director-General, said he was encouraged that the paper proposed a time-limited interim period and a customs system that was as “barrier-free” as possible.

“All efforts should be made to deliver a single-step transition, so that businesses don't have to adapt twice," he insisted.

But Fiona Hyslop, the Scottish Government’s External Affairs Secretary, said Mrs May and her colleagues were still unable to offer any clear and coherent plan for the future on Brexit and said: “If the UK Government wants the ‘most frictionless possible trade’ between the UK and EU, it should commit today to staying inside the customs union.”

Labour’s Chris Leslie, speaking on behalf of Open Britain, which campaigns for closer ties with the EU, said: “It looks like the new unified position in the Cabinet is to return the Government to the territory of wanting to have their cake and eat it.

“Ministers claim we can leave the customs union and yet still achieve ‘the most frictionless customs agreement anywhere in the world’ but with absolutely no detail about how such a miraculous new system will be achieved.”

The former Shadow Chancellor added: “The only way to retain genuinely free trade with Europe and protect the millions of jobs created by it is to remain a member of the customs union.”

Tom Brake for the Liberal Democrats said: "Even if they were agreed to by the EU, these proposals will only delay the economic pain caused by leaving the customs union."

The Government is putting forward two options for customs systems that could be introduced after Brexit: one would see the UK manage a new customs border with administration streamlined to the "fullest extent possible"; the other would be a customs partnership with the EU that would negate the need for a customs border between the UK and the rest of the bloc.

Tomorrow, a more substantial “position paper” on the fraught issue of the post-Brexit border between Northern Ireland and the Irish Republic will published, ahead of the third round of negotiations in Brussels at the end of the month.

Sinn Fein has already warned the imposition of a customs frontier on the Irish border would "play fast and loose" with the economy and peace process.

The republican party dismissed suggestions cross-border trade could be monitored by high technology as "nonsense and impossible to deliver".

Meanwhile, Mrs May is expected to arrive back in Downing Street from her summer holiday in Italy on Thursday.