Britain could be invited to join a European customs area as part of developing closer relations with the EU.

Maros Sefcovic, the bloc’s trade chief overseeing post-Brexit talks, said the Pan-Euro-Mediterranean Convention (PEM) allows manufacturers to take advantage of tariff-free trade.

The previous Conservative government chose not to pursue PEM as part of its post-Brexit trade deal, but some businesses say it would help Britain rejoin complex supply chains that have been hit by customs barriers.

Speaking at the World Economic Forum in Davos, Mr Sefcovic said the idea has not been “precisely formulated” by London yet and the “ball is in the UK’s court”.

In addition, he said that a veterinary agreement to ease farm and food trade should be reviewed.

Observers say a deal would not only help EU traders as well as the UK, given the volume of goods and services crossing the channel.

The EU-UK fisheries deal is also due to expire next year and a solution for fisheries is seen as important for the EU.

Scotland’s First Minister John Swinney has called for closer ties, the restoration of the single market and ultimately for an independent Scotland to re-join the EU. He is keen to improve the flow of labour which would help ease Scotland’s chronic skills shortages.

While the single market is not part of the latest discussions, Mr Sefcovic said the European Commission’s offer on youth exchanges would not mean a return to freedom of movement but is a “bridge-building” proposal.