At least 15 Tory rebels are thought to back a Labour plan to remain in the European Economic Area (EEA) – a number that could be enough to defeat Theresa May in the House of Commons.
Stephen Kinnock, a Labour MP, said he was seeking to form a “coalition of common sense” with like-minded Conservative MPs to keep the UK in the EEA for an unspecified “time-bound period”.
But the plot could see unlimited numbers of EU nationals try to come to Britain, as it would require the UK to remain under the rules of the freedom of movement deal.
Mr Kinnock claims to have had “positive conversations on engaging around a number of issues, particularly the transitional deal and what that might look like” with a number of Tory rebels.
He told the Daily Telegraph’s Chopper Brexit Podcast: “There is a growing recognition now in the economy … that getting the right transitional deal is now the top priority.