Brussels officials have dismissed Theresa May’s latest plan for a customs ‘partnership’ with the EU as “unrealistic” and warned that time is running out for her government to reveal what kind of Brexit it wants.

As EU negotiator Michel Barnier declared barriers to trade would be ‘unavoidable’ if Britain left the EU customs union, senior officials told HuffPost UK that they were still waiting for clarity and precision from the UK.

And they warned that May’s plan to treat new and existing EU migrants differently during a transition period would also be illegal under European law.

The UK should not waste time arguing for ‘incompatible’ demands such as trying to exit the single market while trying to replicate it for financial services, they added. 

A Cabinet sub-committee is set to hammer out its position on customs this week, while the full Cabinet will be expected to agree is vision for an ‘end state’ for Brexit in coming weeks.

On a visit to London, Barnier told the Prime Minister and Brexit Secretary David Davis that he urgently wanted detail on Britain’s plans before the next European summit in March.

Just hours after the meeting Barnier also tweeted that “when the UK leaves the single market, the financial passport is gone” – his most stark warning yet that the City of London will suffer when Brexit kicks in for real in 2020.

Downing Street has in recent days delighted Eurosceptic MPs by declaring clearly for the first time that no kind of ‘customs union’ would be acceptable to the UK.

Brexiteers like International Trade Secretary Liam Fox have won their battle to rule out any replication of the customs union, arguing that it would make it impossible to sign new trade deals with non-EU states.

One alternative proposed by the British Government is a new customs “partnership” which would continue trade without the need for border checks, thanks to a complicated new ‘dual tariff’ system for goods.

But a senior EU official was swift to point out the plan was impractical and would add a regulatory burden to EU business and all its external borders. “The option is unrealistic,” a senior EU official said.

The one other alternative put forward by the UK – a “highly streamlined” arrangement in which EU goods would be subject to customs checks via hi-tech methods – is seen as technically too difficult.

Earlier, former attorney general Dominic Grieve said he found Downing Street’s intervention “rather strange” since the UK would have to maintain some form of “customs union or alignment” with the EU if it was to honour its agreement to prevent any hard border on the island of Ireland.

And Labour said it was “foolhardy” to rule out any kind of customs union with the UK’s largest trading partner.

In a further clear signal of the hard line taken in Brussels on behalf of the other 27 EU nations, May’s other firm line on migrants was also thrown into doubt on Monday.

Some campaigners have claimed that up to two million migrants could head to the UK during the two-year transition period before the country formally severs its existing ties with the EU.

The PM said in China last week that those who arrived after March 2019 would have to be treated differently from their predecessors “because they will be coming to a UK that they know will be outside the EU”.

However, HuffPost understands that European Commission officials believe that there can be no deviation from its ‘acquis’ – a common body of rights and laws binding on all member states – on citizens’ rights during any transition period.

Barnier made plain his view in No.10 on Monday.

After lunch with Davis and a 20-minute meeting with Theresa May, Barnier said there was “some divergence” between the two sides when it came to issues relating to transition and how the exit deal would be enforced.

The next, crucial phase of Brexit talks between the UK and the EU begin this week.

On Wednesday, the EU27 are set to present their legal text of the withdrawal agreement, while on Friday the UK is due to make a presentation in Brussels of what it wants from the ‘future relationship’ after any transition.

The EU 27 are unlikely to agree a transition period without also finalising a ‘future relationship’ deal. 

“The aim of the EU side is to come to a precise decison on the framework for the future relationship that gives certainty. There needs to be a sufficient degree of clarity for the EU council [summit in March],” the EU official said.

“The clearer the UK can be on a future relationship, the more productive the council can be in adopting guidelines.”

Speaking in Downing Street, Barnier said the “time had come” for the UK to choose what it wanted after its 2019 exit.

“The only thing I can say, without a customs union and outside the single market, barriers to trade in goods and services are unavoidable. The time has come to make a choice,” he added.

But Brexit Secretary David Davis said the UK’s position was “perfectly clear”.

The UK wanted a free trade deal with the EU but also the freedom to strike deals with other countries, where trade opportunities were growing.

“There’s no doubt about it. We are leaving the customs union but we are aiming for a good future for Britain,” Davis said.