Brexiters have slammed suggestions that Number 10 could be poised to push for a Single Market for goods, claiming it would bind the UK's hands on future trade deals.
Reports this morning suggested the idea - put forward by think tanks including Open Europe and the Centre for European Reform - was gaining traction in Downing Street.
The Guardian quotes Whitehall sources saying free movement of goods was “100 per cent the direction of travel” as the Prime Minister shifts the focus of talks onto the future relationship ahead of next week's European Council meeting.
But prominent Leavers told City A.M. this was categorically not the case.
"It’s a complete non-starter, and from the dealings I have had with Number 10, it's clear the PM gets that. Being able to do trade deals is the touchstone of whether or not it’s been a successful deal - the idea she willingly would bind her hands, well, it wouldn't happen," said one.
"The key objection is the problem with trade deals," he added. "It's fair to say that services are a major part of our economy, but what do we have to offer any of the other countries in the world if we want to get special trade deal but can’t give them something in return on goods."
This point was echoed by a number of prominent backbench Eurosceptics.
One said: "America doesn't care about doing a deal on financial services - they want to do a deal on goods, so it's goods we have to have a free hand on."
It is thought Cabinet ministers including international trade secretary Liam Fox, foreign secretary Boris Johnson and environment secretary Michael Gove are particularly sceptical of the suggestion, which has gained ground as a solution to the Irish border issue.
Officially the government supports alignment on most areas, although with the opportunity to diverge where necessary, with the acceptance this would result in reduced access.
The Single Market and customs union issues are expected to be the next major front for Theresa May as the government brings forward the Trade and Customs Bills next month, with Tory rebels threatening to vote with the opposition.
However yesterday they capitulated after arch rebel Dominic Grieve voted against his own amendment for a meaningful vote, following last-minute concessions from Brexit secretary David Davis.