Theresa May faces Commons showdown next month with Labour and Tory rebels fighting to stay in EU single market

Theresa May faces a Commons showdown next month when Labour and rebel Conservative MPs join forces to try to stop Britain crashing out of the EU single market on Brexit day.

The MPs plan to force a September vote to keep the UK in the European Economic Area (EEA) for several years at least, to avert fears of severe economic damage when EU withdrawal is completed in 2019.

Crucially, Labour’s frontbench appears to have thrown its weight behind the move, with Brexit spokesman Sir Keir Starmer describing “transition on current terms” as essential.

“Labour will work with others to ensure Brexit transition on same basic terms: including single market and custom union,” Sir Keir tweeted.

It is likely that a backbench amendment will be tabled to the flagship European Union (Withdrawal) Bill – or Repeal Bill – which reaches the Commons floor on 7 September.

Labour MP Stephen Kinnock has already revealed he is in talks with Conservative MPs about temporary EEA membership, to prevent an economic slump in 2019.

Norway, Iceland and Liechtenstein are members of the EEA and, therefore, the single market but not the customs union – also accepting free movement of EU citizens.

Last month, Mr Kinnock told The Daily Telegraph: “I have been reaching out with a particular proposal to 15 Conservative MPs so far.”

A group of 15 rebel Tories could be sufficient to defeat the Conservatives in any Commons vote, given the Prime Minister’s precarious working majority of just 12.

Rebel Conservatives are more likely to back an amendment tabled by a Labour backbencher than one put forward by Jeremy Corbyn’s frontbench team.

On Monday, No 10 ruled out an “off-the-shelf” arrangement such as EEA membership for the transitional period, insisting both single market membership and free movement will end on Brexit day.

However, that contradicted Philip Hammond, the Chancellor, who has told business leaders that he supports the idea, because Britain has no time to negotiate its own transitional trading deal.

Mr Hammond’s stance was backed by William Hague, the former Foreign Secretary, to prevent the “clear potential for Brexit to become the occasion of the greatest economic, diplomatic and constitutional muddle in the modern history of the UK”.

But, illustrating the deep split within Government, Brexit minister Steve Baker has tried to slap down any compromise on Ms May’s original plans.

It would be a fatal show of weakness – “like putting blood in the water” – to talk about the EEA and let Brussels believe Britain is stepping back from the threat of a hard Brexit, he claimed.

As it stands, the EU Withdrawal Bill will not allow the UK to stay in the EEA temporarily, even if a transition deal can be agreed through to about 2022.

Sir Keir’s support for an amendment to secure transition on the same terms suggests he is winning an internal Labour battle for the party to oppose a hard Brexit.

Jeremy Corbyn sacked three shadow ministers who supported an amendment to the Queen’s Speech to retain single market membership and, last month, insisted Britain would leave the trading bloc.