The UK will seek to renegotiate with the EU on the Northern Ireland Protocol and agree a "standstill period" while it hammers out the finer points, officials said on Wednesday in parliament.
This period will put a freeze on existing legal challenges while Britain speaks again to the bloc on its future trading agreements, again putting the original Brexit agreement in question.
Reports earlier said that the UK would threaten to deviate from the Brexit deal unless the EU offers more flexibility over Northern Ireland, Reuters reported, citing sources.
Chief negotiator David Frost told MPs on Monday that the current agreement was not sustainable and if an agreement could not be reached the UK would consider unilateral action through Article 16, which allows the EU or UK to unilaterally suspend aspects of its operations if either side considers that aspect to be causing “economic, societal or environmental difficulties”.
The statement on Wednesday in parliament confirmed the UK will not yet invoke Article 16 in favour of the standstill period as it hopes to rework a relationship currently "built on mistrust".
“Since January there has been continued uncertainty for businesses as various easements have been applied, followed by approaching cliff edges and then extensions of the easements. Firms need durable and consistent arrangements which provide clarity about trading conditions in the medium to long-term," said William Bain, head of trade policy at the British Chambers of Commerce.
“Stronger engagement with business, particularly in Northern Ireland, must be central to the next stage of this process if viable solutions are to be found."
The Northern Ireland Protocol's original aim was to stop Brexit from disrupting a hard-negotiated peace brought by a 1998 agreement but has become a crucial sticking point in Brexit discussions, even after the end of the transition period in January.
Meanwhile, Marks & Spencer (MKS.L) warned it would cut Christmas products in Northern Ireland in order to avoid forthcoming post-Brexit customs checks.
Trade between Britain and the EU is currently subject to a so-called grace period, with light-touch checks. However, that runs out in September.
M&S's chairman Archie Norman told Radio 4's Today programme that the changes would mean higher prices and less choice for the region, slamming them as "pointless".
Norman called for a "common-sense approach to enforcement".
The developments are the latest in a long list of trading issues caused by Brexit. Christmas saw significant disruption at ports, with lorry tailbacks and delays in the delivery of key produce. Changes to VAT and shipping rules have also hit businesses.
Watch: UK to set out proposals for Northern Ireland Protocol on Wednesday