The UK Government has suffered three further defeats, and 13 in total, over its flagship Brexit legislation in the House of Lords.

In the sixth and final report stage debate on the EU (Withdrawal) Bill, peers backed retaining key aspects of the single market by continued participation in the European Economic Area (EEA).

The vote by 245 to 218, majority 27, came in defiance of both the Government and Opposition frontbenches.

While the Opposition's official stance was to abstain, 83 Labour peers rebelled against the frontbench and 17 Tories rebelled against the Government by supporting the amendment.

The EEA allows for the free movement of persons, goods, services and capital within the European single market.

Labour's Lord Alli said continued membership of the EEA was vital to ensure the future profitability of the UK's export business.

Lord Alli, moving the successful amendment, said: "It is the EEA that deals with services, services like retail, tourism, transport, communications, financial services and aerospace where we have a £14 billion trade surplus in these services.

"The customs union only will benefit our European neighbours in their imports and without an EEA equivalent it will damage our profitable export business and therefore the jobs and livelihoods of many thousands of people.

"It's for that reason that we need to ensure that any continuation of the customs union must include a continuation in the EEA or its equivalent."
Tory former minister Baroness Verma spoke in favour of the amendment, telling peers that continued membership of the EEA offered businesses "certainty".

Labour former Cabinet minister and ex-European trade commissioner Lord Mandelson also spoke passionately in support of the amendment, warning peers not to be bullied and to do what was right for the country.

Stressing the huge importance of services to the UK economy, Lord Mandelson warned the impact of quitting the single market without EEA access on cross-border delivery of services to Europe would be "savage" with a significant proportion of broadcast production, banking and insurance "hit for six".

For Labour, Lady Hayter said the Prime Minister had made a "grave mistake" in sweeping certain options off the table but warned the amendment defined "the structure, not what it is we want to achieve".

She said she agreed with the objective and a deal on services was urgently needed but the "particular model defined may have some shortcomings".

It also "cuts across" the major amendment passed by the Lords last month in favour of being in a customs union.

To some cries of "shame" from Labour colleagues, Lady Hayter said because of the "possible practical problems" and other reasons set out Labour peers should abstain in the vote.

Responding for the government, Brexit minister Lord Callanan warned remaining in the EEA "would not deliver control of our borders or our laws".

He said: "On borders it would mean that we would have to continue to accept all four freedoms of the single market, including freedom of movement.

"On laws it would mean the UK having to implement new EU legislation over which in future we will have little influence and, of course, we will have no vote.

"This will not deliver on the British people's desire as expressed in the referendum to have more direct control over decisions that affect their daily lives."

The debate exposed deep divisions on both the Labour and Conservative benches.

Labour rebels backing the amendment included former party leader Lord Kinnock, Lord Mandelson and ex-Cabinet minister Lord Hain. The Tory rebels included former Cabinet minister Lord Patten of Barnes and former deputy prime minister Lord Heseltine.

Earlier, in the first defeat for ministers of the day, peers backed a move to allow Britain's continued participation in EU agencies.

The cross-party amendment, approved by 298 votes to 227, majority 71, will also ensure future EU laws can be replicated on the UK statute book.

Peers quickly inflicted a second defeat on the Government by voting to remove the Brexit date of March 29 2019 from the Bill.

Voting for this cross-party amendment, spearheaded by the Conservative Duke of Wellington, was 311 to 233, majority 78.