Theresa May accused of being ‘held hostage by extreme Brexiteers’ as crucial customs decision 'shelved'

Jacob Rees-Mogg denies 'making threats' - despite 30-page report setting out why prime minister's 'customs partnership' plan is unacceptable

Theresa May is facing fresh accusations of being “held hostage by extreme Brexiteers” as a crucial decision on new customs rules after leaving the EU is set to be delayed again.

A clash on which alternative to the customs union the UK will pursue – which has the potential to spark cabinet resignations and a backbench revolt – will dominate a meeting of key ministers today.

But the prime minister is expected to keep both of Downing Street's options on the table, resisting fierce pressure from anti-EU Tories to dump her “customs partnership” idea.

David Lidington, Ms May’s effective deputy, said key decisions would be made “over the next few weeks” – appearing to confirm a choice on the customs model had been shelved.

It follows an overnight warning by the 60-strong European Research Group of anti-EU Tories, warning the government will “collapse” if the customs partnership plan is not abandoned.

Under the proposal, Britain would mirror the EU's customs regime at its borders and collect tariffs on behalf of Brussels – failing to deliver a clean break, Brexiteers protest.

Paul Blomfield, Labour’s shadow Brexit minister, said: “This is yet further evidence that Theresa May is being held hostage by the extreme Brexiteers in her own party.

“Crunch time is coming on what our future customs arrangements with the EU should look like. However, the Tories appear more interested in issuing ultimatums and squabbling amongst themselves than acting in the national interest.”

Tom Brake, the Liberal Democrat Brexit spokesman, said: “The Prime Minister is kicking the can down the road in a desperate attempt to hold the widening fissures of the Tory party together. It cannot and will not work.”

The clock is ticking, because the EU has demanded answers on how future customs arrangements can avoid a hard border in Ireland by June - having rejected both of No 10's proposals.

The ERG has sent the prime minister a 30-page report setting out why her customs partnership is unacceptable, amid hints of withdrawing support for Brexit legislation unless it is scrapped.

Liam Fox, the Trade Secretary, has refused to rule out resigning over the controversy – and Boris Johnson, the Foreign Secretary, has also made a definitive break from the customs union a red line.

Jacob Rees-Mogg, the ERG’s leader, said the partnership plan was “deeply unsatisfactory, flawed and not get us out of the European Union, which is what people voted for”.

However, speaking on BBC Radio 4’s Today programme, he insisted he was “not in the business of making threats” to Ms May, adding: “There is no question of there being an ultimatum.

“It’s not a revolver, it’s not a duelling pistol, it’s an important contribution to the debate,” Mr Rees-Mogg said, of the ERG’s report.

The customs partnership would, if Britain cut tariffs in the future, see a new tracking system allow importers to claim back a refund from the government if their goods were destined for the UK market.

No 10 believes the plan offers the best hope of avoiding a hard border in Ireland, but it would be complicated to administer and could take at least five years to introduce.

Eurosceptics fear it is doomed to fail – which would allow the EU to push Britain into staying in a customs union even after the 21-month transition period.