The Northern Ireland Protocol is “dead in the water”, a senior ally of Boris Johnson has said as the Government gave the European Union two months to make the system work.
Ministers are increasingly worried about the way that the European Union is enforcing checks when goods move from Great Britain and Northern Ireland.
There are fears among senior figures that unless the EU eases checks in time for when the marching season reaches its peak on July 12, tensions could flare.
A Government source said: “The marching season is a date whereby you would want to have a material improvement in what is happening.
“We need a bit of movement by then because that is when we risk seeing the kind of disruption and the protests that we had recently.”
The terms of the Protocol, signed as part of the UK’s exit from the European Union, are designed to stop goods originating from Great Britain passing into the Republic of Ireland without any checks.
However the UK Government estimates the EU is carrying out 20 per cent of all its external border checks at the so-called ‘sea border’ in the Irish Sea.
One UK source said EU officials were halting shipments of own-brand loaves of bread being transported from a Sainsbury's supermarket in Liverpool to a sister store in Belfast, even though there are no Sainsbury’s shops in the Republic.
Lord Frost, Boris Johnson’s Brexit negotiator, and his team are examining the idea of ‘mutual enforcement’ of border checks, in which either side enforces checks at the same level as the other, effectively removing them. However the EU is said not to want to engage.
Officially the Government still wants to make the protocol work, with insiders insisting that Boris Johnson, the Prime Minister, does not want to rip up a treaty just six months into Brexit, although nothing is ruled out.
One source said: "If they don't make improvements in the next period of time obviously we are going to have to consider other options."
The replacement of Democratic Unionist Party leader Arlene Foster with the more hardline Edwin Poots on Friday has increased jitters in Number 10.
Senior allies of Mr Johnson are increasingly pessimistic with one describing the protocol to The Telegraph as “dead in the water”.
The senior ally added: “The Northern Ireland Protocol does not work. It contravenes the Good Friday Agreement in many ways. It is damaging.
“It is not a workable agreement. Whatever you think about Arlene Foster, she was a moderate. And it is always dangerous when you start losing moderates from these key positions.”
Mr Poots increased pressure over the protocol on Saturday, pointing out that more than twice as many checks are carried out in Northern Ireland ports as in Rotterdam.
He told The Telegraph that it was “damaging Northern Ireland’s economy and undermining the Union” by “disrupting trade with our biggest and most important market”.
He added: “No rational argument could be made for the Protocol. It is madness and must go. We hear Lord Frost’s words and we hear the Prime Minister’s words but we need to see action.
"The mechanisms are open to the Government to deal with this flawed Protocol but the longer it is left untouched the more damage it is causing. We will be pressing the Government to act and act with urgency.
A senior Government source said on Saturday that the UK still wanted to make the protocol work.
They said: “The EU’s strict approach to implementing the protocol is having a huge impact on the everyday lives of the people of Northern Ireland, and worse still, there are signs that it is upsetting the delicate balance of the peace process.
“We cannot tolerate unreasonable impacts on trade across the United Kingdom. This is not consistent with the Belfast/ Good Friday Agreement or, therefore, with the Protocol.
“We’re totally focused on protecting the Belfast/Good Friday Agreement and restoring stability on the ground in Northern Ireland.
“As a co-signatory of the Protocol the EU has a responsibility to support these efforts. But if the EU’s only concern is the protection of their Single Market, the arrangement risks becoming unsustainable.
“We are continuing to work hard to resolve problems with the EU in a pragmatic way. If we cannot, as the PM has said, no options can remain off the table.”