Britain could seek a temporary “customs union” with Europe after Brexit as it tries to protect manufacturing exports and jobs.
With a third round of Brexit negotiations due later this month, the U.K. is under growing pressure to clarify its plans for trade and immigration once it leaves the European Union in March 2019.
The U.K. government said Tuesday in a position paper that it wanted to negotiate new customs arrangements that "facilitate the freest and most frictionless possible trade in goods between the U.K. and the EU."
Officials would seek to maintain a "close association" with the EU during a limited transitional period after Brexit to allow business time to adjust.
"One possible approach would be a temporary customs union between the U.K. and the EU," the government said. "During this interim period... Britain will look to negotiate bold new trade relationships around the world."
It did not say how long the interim arrangement would last. Treasury chief Philip Hammond said earlier this month that Britain may need a transitional period of up to three years to protect the economy from the shock that a clean break with the EU would bring.
The CBI, which represents 190,000 businesses, said it welcomed the government's proposals.
"But the clock is ticking and what matters now is giving companies the confidence to continue investing as quickly as possible," it said in a statement.
Manufacturing makes up 45% of U.K. exports and directly employs 2.7 million people. EU member countries account for more than 50% of British manufactured exports, and integrated supply chains mean goods can cross borders several times during the production process.
The EU customs union allows goods to circulate freely, with no tariffs between member states.