Jeremy Corbyn (left), Labour party leader, and Theresa May, Conservative prime minister © AP

Theresa May’s Brexit strategy has come under fierce pressure after Labour announced it would change tack and campaign to keep Britain in the EU single market, at least during a transition period.

After months of confusion over its Brexit policy, Labour now wants to in effect maintain the status quo in Britain’s relations with Europe for a transition period after the country leaves in March 2019.

That would mean payments into the EU budget, free movement of people and the jurisdiction of the European Court of Justice would continue for a fixed period — possibly up to 2022 — setting up a clear dividing line with Mrs May.

The Labour policy will be welcomed by business and reflects the Treasury’s view that British companies should face only “one transition”, when Britain moves from an interim regime to a final settled state based on a proposed free trade agreement.

Mrs May will now face pressure from Labour to adopt a “status quo” transition when MPs return to the Commons in early September to begin debate on the withdrawal bill paving the way for Brexit.

With a working Commons majority of just 13 — thanks only to a deal with the Democratic Unionist party — Mrs May could be forced by parliament to accede to a status quo transition if only seven pro-EU Tories sided with Labour.

In a further move that will delight many pro-EU Labour backers, The Observer newspaper reported that Jeremy Corbyn’s party would also leave open the option of the UK remaining a member of the customs union and single market for good.

The government has said it will leave the single market and customs union at the point of Brexit, but this month said it would try to negotiate a new customs relationship with the EU during a transition, replicating the existing one.

However it has not committed to staying in the single market, with its implied acceptance of all EU laws, regulatory bodies, budget contributions, free movement and the direct jurisdiction of judges in Luxembourg.

Although Mr Corbyn has indicated Britain will have to ultimately leave the single market after a transition period in order to control immigration, pro-European Labour MPs hope the EU would become more flexible on that point in the next few years.

The decision to stay inside the single market and abide by all EU rules during the transitional period, and possibly beyond, was agreed after a week of intense discussion between Mr Corbyn and Brexit spokesman Sir Keir Starmer.

Sir Keir told The Observer the time for “constructive ambiguity” was over. “Labour would seek a transitional deal that maintains the same basic terms that we currently enjoy with the EU,” he said.

“That means we would seek to remain in a customs union with the EU and within the single market during this period. It means we would abide by the common rules of both.”

Chuka Umunna, Labour MP and leading supporter of the pro-EU Open Britain group, said: “This is a most welcome announcement and a significant moment in the Brexit debate so far.

“A ‘jobs first’ Brexit is only possible through continued British membership of the single market and customs union.”

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