Theresa May's Brexit committee of senior ministers is meeting on Wednesday to plan the UK's future course in negotiations as the European Union threatened to punish Britain if it breaks rules during a transition period after leaving the bloc.
The EU’s draft document says that it would be allowed to ground flights and suspend single market access and impose trade tariffs if it breaches the terms of any departure deal.
The government sought to play down the significance of the EU memo saying that it was the basis for upcoming discussions between the two sides about the expected two-year transition period when it leaves the bloc in March 2019.
The transition period is designed to give UK businesses longer to prepare for the historic split after 45 years of membership. The deal is likely to see Britain have access to the single market continue for around two years while sticking to its rules but having now say over decisions.
A Department for Exiting the EU spokesman said the document and a speech by Brexit Secretary David Davis last month set out the two sides' positions as talks started this week on trying to secure a deal over the next month.
Mrs May will chair two days of talks focusing on immigration, Northern Ireland and on Thursday the future partnership.
Mrs May’s expressed commitment to leaving the EU customs union has sparked concerns among business groups and led to further questions about what it means in the island of Ireland.
Critics say that leaving the customs union could mean a return to the so-called “hard border” to monitor the flow of goods between EU member, the Republic of Ireland, and Northern Ireland, which is part of the UK. Mrs May has also said that she would ensure there would be no “hard border” but has come under pressure to explain how that would happen.
The business spokeswoman for the opposition Labour party said the party would consider having a customs union, after months of ambiguity about its position. “It is certainly a possibility and we wouldn't rule anything out at all,” Rebecca Long-Bailey told the BBC.