Theresa May is facing the threat of a Commons rebellion on staying in the customs union, following an eight hour meeting held with senior Cabinet members which was intended to thrash out an agreement on the government's Brexit strategy.
The Brexit "war cabinet" at Chequers was called to plot a way forward but the Prime Minister was threatened with a fresh challenge to her authority from pro-Europe Conservative backbenchers.
Former minister and leading Tory rebel Anna Soubry insisted she had cross-party support for a new amendment to the Government's trade bill which would mandate the UK to form a customs union with Brussels after Brexit.
The move presents an increased danger to the PM because Labour's shadow foreign secretary Emily Thornberry said the party now backed a customs union that would look "pretty much like" the current one after withdrawal.
The Chequers "away day" saw the inner Cabinet committee discuss the impact of Brexit on the automotive sector, agri-foods, digital trade, as well as the overall future economic partnership the UK is seeking to reach with the EU.
May will set out the Brexit agenda in a major speech next week following a meeting of the full Cabinet.
Labour leader Jeremy Corbyn is to unveil a competing vision of how Brexit should work in what is being billed as a significant address on Monday, after some backbenchers called for more clarity from the leadership.
Meanwhile, EU migrants who arrive in the UK during any transition period will be allowed to stay permanently, The Times reported.
Such a move would represent a major climb-down by May after she insisted those arriving after March 2019 should not have the same rights as people who came before.