Ms Reeves failed to rule out a customs union on Wednesday when was asked by the House of Commons Treasury Committee if this was the Government’s plan, replying instead: “Good try.”

Reform UK leader Nigel Farage said: “British sovereignty is on the line once more.”

He said: “Keir Starmer’s government has effectively given up on pretending that they accept the vote to Leave the European Union. Instead, Labour is working to bring Britain back under closer control by EU rules.”

Deputy Prime Minister David Lammy has called for the UK to sign a new EU customs deal while Health secretary Wes Streeting has refused to rule out an agreement.

MPs this week voted to begin talks with Brussels on a new customs union, which would mean the UK obeying EU trade rules. While the vote is not binding on the government, 13 Labour MPs backed the plan alongside Liberal Democrat, Green and SNP MPs, while just three joining the Tories and Reform to oppose the proposal. Others Labour MPs stayed away, apparently obeying orders from the leadership to abstain.

Shadow Foreign Secretary Dame Priti Patel told the Express: “The direction of travel here is clear.”

She said: “Starmer keeps talking about a ‘reset’ with the EU as a solution to our troubles. But we all know what that means. Handing over our country to distant, unelected officials on the continent who don’t have our best interests at heart.”

Dame Priti added: “A customs union means giving away control of your borders and your trade policy to Brussels bureaucrats.”

The Chancellor yesterday highlighted figures which she said showed trade barriers with the EU had led to a 4 per cent reduction in productivity. She told the Commons Treasury Committee that the Government wanted to negotiate more EU deals in addition to the “reset” agreed earlier this year.

Ms Reeves said: “It’s why we’ve got this reset with the EU and why we are at the moment negotiating around a new food and farming agreement, energy trading, Erasmus, and a new youth mobility scheme. Because we recognise that making it hard to trade with your nearest neighbours and trading partners is not exactly good for businesses.”

Deputy Prime Minister David Lammy has said the UK could follow in the footsteps of countries such as Turkey and form a new customs union with the EU. He said: “You can see countries like Turkey with a customs union seemingly benefiting and seeing growth in their economy, and again, that’s self-evident.”

And Health Secretary Wes Streeting refused to rule out joining a customs union when asked repeatedly about the idea in an interview with Times Radio. Instead, he said Britain was a “European country” and needed a closer relationship with the bloc to undo “the economic damage done by Brexit”.

Economist Minouche Shafik, appointed as Sir Keir’s Chief Economic Advisor in September, is also reported to have suggested rejoining the customs union in the run-up to the November Budget.

Speaking in Parliament yesterday, Sir Keir said he would not do anything to threaten the trade deal agreed between the UK and US President Donald Trump, which he said benefits carmakers such as Jaguar Land Rover (JLR). Sir Keir told MPs: “Having now done significant trade deals with other countries, including the US and India, which are hugely important to the JLR workforce and on pharma, it is not now sensible to unravel what is effectively the best deal with the US that any country has got.”

But the Prime Minister has abandoned any attempt to suggest that he supports Brexit, saying instead that it has “significantly hurt” the UK. In a speech earlier this month he said: “For economic renewal, we have to keep reducing frictions. We have to keep moving towards a closer relationship with the EU.

“And we will have to be grown-up about that, to accept that this will require trade-offs.”

The UK was a member of the EU Customs Union until it left at the end of 2020. As well as rejoining, options include creating a new, bilateral agreement customs agreement such as the one the EU has with Turkey. This would mean the UK follows the EU’s lead on setting tariffs on goods imported from other countries, adopts EU safety regulations, and allows the EU to dictate state aid rules.

The Customs Union (Duty to Negotiate) Bill, tabled by the Liberal Democrats’ Europe spokesman Al Pinkerton, passed its first Commons hurdle on Tuesday. Labour MPs voting in favour included Dame Meg Hillier, chair of the Commons Treasury Committee. Bills tabled in this manner are unlikely to become law without Government support due to parliamentary time.