Labour is to announce a dramatic policy shift by backing continued membership of the EU single market beyond March 2019, when Britain leaves the EU, establishing a clear dividing line with the Tories on Brexit for the first time.

In a move that positions it decisively as the party of “soft Brexit”, Labour will support full participation in the single market and customs union during a lengthy “transitional period” that it believes could last between two and four years after the day of departure, it is to announce on Sunday.