Britain and the EU are closing in on an outline Brexit deal but concerns have already been raised about its threat to the future of the Union.

As time runs out ahead of tomorrow’s crunch European Council summit rumours swirled on both sides of the English Channel about the prospect of a breakthrough with a suggestion that a draft treaty could be published on Wednesday morning.

Diplomatic sources claimed the UK had agreed in principle to a customs border down the Irish Sea.

Yet it is hard to see how the Democratic Unionists or the Scottish Conservatives could agree to Northern Ireland being treated differently from the rest of the UK given previous fears expressed about how such an arrangement would pose an existential threat to the 312-year-old Union.

In December 2017, Theresa May had to abandon a similar plan following deep concerns from the DUP’s Arlene Foster and the then Scottish Tory leader Ruth Davidson.

As Nicola Sturgeon, the First Minister, suggested any deal effectively keeping Northern Ireland in the single market and customs union should be replicated in Scotland, Ms Davidson made clear the UK must not “be divided by different deals for different home nations”.

Last night, Tim Farron, the former Liberal Democrat leader, tweeted: “A weakened PM seems to have buckled and is going to propose a border in the Irish Sea…If this happens, it means the end of the United Kingdom. First Northern Ireland and then Scotland will go. No genuine Unionist will vote for that."

But one diplomatic source referred to what some will regard as a blatant political fudge: “Northern Ireland would ‘de jure’ be in the UK’s customs territory but ‘de facto’ in the European Union’s.”

Ms Foster made clear talk of a Northern Ireland-only backstop was “very far off the mark,” telling the BBC: “We must remain within the UK's customs union. It is a principle we have and that will forever be there. We have to be integrally within the UK."

The prospect of a deal boosted the pound, which jumped as much as 1.2 per cent, reaching its highest level in almost four months.

At 4pm today, Boris Johnson will brief his Cabinet on the latest developments; around the same time the European Commission will update EU ambassadors.

After a marathon session of technical talks on Monday, Michel Barnier yesterday continued to exude an air of optimism and was said to have demanded the UK present a final legal text by close of play on Tuesday. He suggested a "narrow path" existed to seal a deal this week.

Downing St dismissed the idea of a deadline but stressed how intense work continued to broker a deal by the start of the European Council on Thursday. "Talks remain constructive but there is more work still to do," said the Prime Minister’s spokesman.

After a phonecall with Emmanuel Macron, the French President, Mr Johnson agreed there was "positive momentum" but "many hurdles" were left to overcome.

The language in London, Dublin and Brussels appeared calibrated to keep hope of a deal alive while stressing work remained to pin it down.

Leo Varadkar, the Irish premier, noted: “Initial indications are that we are making progress, that the negotiations are moving in the right direction. But whether we’ll be able to conclude a revised withdrawal agreement - which after all is an international treaty - for the summit on Thursday, that’s as of now unclear.”

His deputy, Simon Coveney, raised the prospect of the talks going beyond this week’s two-day summit. He said: "We are not putting any deadlines on these discussions. It's possible to move beyond the summit and continue talks next week.” Talk in Brussels was of possibly calling another summit on October 28 to finally agree the legal text.

One senior EU diplomatic source concluded a postponement of Brexit beyond October 31 was now inevitable, saying: “Without a deal this week, Britain will need an extension. With a deal this week, Britain will need an extension.”

After the PM had a 90-minute meeting with the DUP on Sunday, yesterday evening senior members of the Conservative pro-Brexit European Research Group held talks in Downing St.

Steve Baker, the former Brexit Minister, emerged to tell reporters: “We had very constructive talks with the Government but there's very little I can say. It wouldn't be right to give you any details.”

He added: "It was a very constructive conversation and I am optimistic that it is possible for us to reach a tolerable deal that I will be able to vote for."

Fellow Conservative Brexiteer Mark Francois described the meeting as "interesting" and added "there'll be further chats to have" on Brexit.

Downing Street officials are understood to have been meeting with various parliamentary factions in recent days as a team of 15 UK negotiators try to hammer out a deal with their EU counterparts.

Meanwhile, the Liberal Democrats have tabled an amendment to the Queen's Speech calling for any Brexit deal to be put to voters in a referendum.

If it were selected by John Bercow, the Commons Speaker, it could be voted on by MPs early next week.

Jo Swinson, the Lib Dem leader, said: "The Liberal Democrats are the strongest party of Remain and have been the leading voice in the People's Vote campaign.

"Boris Johnson is determined to have a general election but the best way to resolve the Brexit chaos is to have a People's Vote and give the British people the final say about their future.

"The best deal we have is as members of the European Union and we want to give the people the chance to choose to stop Brexit," added the Scot.

But Paul Scully, the Deputy Tory Chairman, said: “Yesterday the Liberal Democrats wanted to ignore 17.4 million voters by revoking Brexit, today they want to do it by holding a second referendum.

“Whatever they wake up saying tomorrow, it’s clear that what you’ll get with them is more delay, gridlock and uncertainty.”