David Davis wants two-year customs union with EU after Brexit

A temporary customs arrangement with the EU will be "in both sides' interests" but any transition period should not exceed two years, the Brexit Secretary has said.

David Davis spoke to Sky News after the UK proposed creating an interim customs union to avoid a "cliff-edge" for manufacturers after Brexit.

The plan is contained in the Department for Exiting the European Union's first "future partnership paper".

Mr Davis said a limited transition period would "enable business to continue as usual" while new systems are put in place.

He estimated the transition period would be roughly two years - with the deadline of the next General Election in 2022 as the "absolute maximum".

:: Brexit tension brewing over Irish border plans

Mr Davis said there was "a whole series of things to be done which we think are eminently doable inside that two-year period - or whatever it is".

He added: "I would think maybe as much as that but no more."

"Unlike Big Ben it shouldn't take forever," Mr Davis joked, in reference to repair works that will silence the tower clock for four years .

Negotiations with the EU are "tough", "occasionally tense but amicable", he added, saying the divorce bill and the citizens' rights are especially sensitive issues.

"We're making progress. I think the European Union is now beginning to understand our position better, there was a lot of misunderstanding at the beginning," Mr Davis said.

The Government plan for an interim arrangement is designed to keep the Cabinet united after disagreements over whether the UK should remain in the customs union.

:: Brexit: Hammond and Fox pledge fixed transition to avoid 'cliff-edge'

The customs union allows goods to travel across the EU free of tariffs and checks.

Remaining part of this system would restrict Britain's ability to sign independent trade deals with non-EU countries, with a common external tariff applied outside the zone.

The EU Parliament coordinator Guy Verhofstadt tweeted: "To be in & out of the Customs Union & "invisible borders" is a fantasy. First (Other OTC: FSTC - news) need to secure citizens rights & a financial settlement."

A European Commission spokesman said the UK position paper on customs would be examined carefully.

"We take note of the UK's request for an implementing period and its preferences as regards the future relationship, but we will only address them once we have made sufficient progress on the terms of the orderly withdrawal," the spokesman said.

"An agreement on a future relationship between the EU and the UK can only be finalised once the UK has become a third country.

"As (EU chief negotiator) Michel Barnier has said on several occasions, 'frictionless trade' is not possible outside the single market and customs union."

Labour's shadow Brexit secretary, Sir Keir Starmer, branded the customs proposals "incoherent and inadequate" and "designed to gloss over deep and continuing divisions within the Cabinet".

:: When PM's holiday's over will things get better?

He said: "Businesses, trade unions and the country need certainty about our future trading and customs arrangements.

"They also need a pragmatic and considered approach that delivers the best deal for Britain.

"Instead, the Cabinet remain split on key issues and cannot decide between two very different but equally unachievable options.

"The first proposal suggests 'a new customs border with the EU' could be introduced without disrupting trade; the second suggests a new borderless customs partnership could somehow be agreed while Britain also signs external trade deals.

"These fantastical and contradictory proposals provide no guidance for negotiators or certainty for businesses.

"The proposals also make it less likely that necessary transitional arrangements will be in place by March 2019.

"Labour is clear that we need to retain the benefits of the customs union and avoid a cliff-edge for the British economy.

"That means committing now to strong transitional arrangements on the same basic terms we currently enjoy - including the single market and the customs union."

Outlining a position on customs arrangements helps bring some clarity to the position of the border with Ireland (Other OTC: IRLD - news) .

A further Government paper on the issue of Ireland's border will be published on Wednesday.