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EU negotiators have made clear that they are willing to discuss terms by which Britain remains inside the bloc's customs union, or to negotiate a separate customs union like the EU's deal with Turkey, which would entail agreed-upon, common tariffs on imported goods. The EU has rejected their proposals on the Irish question because their proposals were fantasy with no basis in reality or in global law.

Mrs May said in her speech last month that remaining in the customs union would "not be compatible with a meaningful independent trade policy".

However, Ireland is in the last 25% and Barnier admitted negotiations could still fail.

Labour MP Stella Creasy, of the People's Vote campaign pushing for an European Union referendum on the final Brexit deal, accused Theresa May of "magical thinking" over the Irish border.

A UK Government spokesman insisted that Britain was "continuing an intensive work programme to engage" on all the scenarios set out in the Joint Report agreed in December by Mrs May and European Commission president Jean-Claude Juncker.

This is apparently because none of the customs options put forward would work.

Mrs May will reportedly gather her "war cabinet" for weekly meetings as she tries to figure out a new solution to the border and customs union issues.

In stating their willingness to forge an ambitious new free-trade agreement with the United Kingdom, the EU27 leaders declared any deal should include "appropriate customs cooperation, preserving the regulatory and jurisdictional autonomy of the parties and the integrity of the EU Customs Union".

In response to the latest set back, Mrs May is to chair weekly meetings of the government's Brexit negotiators to try and find new solution ahead of the next European Union leaders' summit in ten weeks time. This would remove the possibility of a hard border in Northern Ireland, but it is opposed by hardline Conservative MPs.

Then on Thursday, a group of senior MPs introduced a motion calling for the U.K.to seek "an effective customs union" with the EU, citing the importance of avoiding a hard border on the island of Ireland. In the specific case of Northern Ireland, it would have allowed traders to operate across the border without any checks. The UK government said that this would enable "around 80 percent of small businesses to operate with no new requirements in relation to customs processes".

The foreign secretary, Boris Johnson, told the Daily Telegraph on Wednesday: "Without your ability to do things in a different way if you want, and your ability to do free trade deals, there is very little point in Brexit".

The EU has made clear it will shift its negotiating position in response to any change in the U.K.'s red lines.

EU and Union flags are reflected in a puddle in front of the Houses of Parliament in London, Britain, March 28, 2018.