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UK opposition sows government unrest with EU customs union call

In a shift of stance likely to raise pressure on U.K. Prime Minister Theresa May as she attempts to avert a rebellion by pro-European members of her own party, the main opposition Labour Party came out in favor of the U.K.'s remaining in a customs union with the European Union after Brexit.

Labour leader Jeremy Corbyn, whose euroskeptic views have up until now frustrated many of his own parliamentarians, called for a bespoke deal which would avoid any tariffs on trade between the U.K. and the EU.

"When 44% of our exports are to EU countries and 50% of our imports come from the EU, then it is in both our interests for that trade to remain tariff-free," Corbyn said in a much-flagged speech in the city of Coventry, which analysts said was calculated to stir unrest among pro-EU elements of the prime minister's fragile majority.

"I appeal to members of parliament of all parties, prepared to put the people's interests before ideological fantasies, to join us in supporting the option of a new U.K. customs union with the EU," Corbyn said.

Conservative May "categorically" ruled out remaining in the EU's customs union earlier in February. The government says this would entail adopting EU tariffs on goods from the rest of the world and make it impossible to negotiate free trade deals with third countries. Instead, Brexit Secretary David Davis wants a "Canada plus plus plus" deal, which includes elements of the bloc's agreement with the North American nation, plus access for financial services.

The shift in Labour's stance will make it more difficult for the government to fend off amendments proposed by pro-EU Conservatives to the trade and customs bills. Some parliamentarians have said that losing one of these votes could bring down the government.

"Business will largely welcome Labour's new position," Nigel Driffield, a professor of International Business at Warwick Business School, said. If the current EU rules continue to apply to U.K., it can be "business as usual" for companies in Britain but if the EU plays hardball, the country will have a lot to do to maintain the supply chains of its headline companies, Driffield added.

May is set to lay out her updated Brexit strategy on March 2, as London prepares to negotiate the terms of post-Brexit trade with the EU. The U.K. is set to leave the bloc in March 2019, although a transition period should mitigate the impact on business.