Angela Merkel’s closest ally in the EU’s Brexit apparatus has said the transition period could be extended if Britain needs more time to prepare for leaving the bloc.

German Christian Democrat Elmar Brok said the length of the 21-month period agreed by EU and UK negotiators should not be untouchable like “the Bible”, with businesses on both sides of the Channel calling for a smooth transition.

It comes after Theresa May admitted publicly that Britain’s new customs system may not be ready by the end of the currently planned transition, but also as a senior cabinet minister said he would refuse to accept a longer period.

Speaking to The Independent, Mr Brok, said he would “not have a principled position against” the kind of extension which Brussels insiders say the British have been seeking behind the scenes.

The senior MEP, who sits in the European parliament’s six-person Brexit steering group, also warned that Brexit talks were heading for a conclusion that would be more damaging to the UK than the EU.

Asked if the transition period would be long enough, he told The Independent: “Let’s see. I think that the transition period is just to be there to win time for such negotiations. Otherwise you would not have the transition period, you would have automatically on the 29 March next year full Brexit, with no understandings and agreements, full tariffs and full tariff barriers.

“It’s 21 months, but I think this 21 months should be not be the Bible. It’s easier, because then the present budget circle closes and the new one starts. The European parliament said in its resolution last year that it should have a maximum three years. This is not a question of life or death, how long it should be.”

He added: “Prolongation might be possible, it should be very limited. But I think that is also in the common interest, because so long as the transition period is enforced the United Kingdom must fulfil all the rights of the four freedoms, the financial support of the EU budget and the rulings of the European Court of Justice. If Britain wants to prolong that, I would not have a principled position against it.”

Britain is set to formally leave the EU on 29 March 2019, two years after the Prime Minister triggered Article 50 and started the legal process of exit.

But under a deal approved at the European Council summit this month, little will change until the start of 2021 during an “implementation period” where the UK continues to follow EU rules and keep full free movement for EU citizens.

Addressing the progress of talks so far, Mr Brok struck a positive tone: “The progress was much better than I thought. We already have the transition agreement in place as part of the withdrawal agreement, which was a surprise to me.

“We have in place, more or less, the citizens’ rights questions and the financial section – so let’s say around two thirds of all these withdrawal things, which we have to finish in these negotiations before October, are in place.

“This week I’m much more confident that we’ll come to a deal than I was a week before.”

But he added: “Britain has to consider that Brexit is damage for all of us, but that because of the different size of the European Union and Britain, the damage is higher for Britain – because of the lack of market access and the lack of investments from other parts of the world. They lose the ‘gate’ function to the European market. They do not make investment anymore into England, they will make investments elsewhere.”

Theresa May told a parliamentary committee on Tuesday that “sometimes the timetables that have originally been set are not the timetables that are necessary” when it came to getting ready to leave.

“We are looking at different potential customs arrangements for the future in order to deliver on the commitments that we have made,” she told MPs on the liaison committee.

“I think it is fair to say that, as we get into the detail and look at these arrangements, what becomes clear is that sometimes the timetables that have originally been set are not the timetables that are necessary when you actually start to look at the detail and when you delve into what it really is that you want to be able to achieve.”

The EU has been coy on the subject of extending the transition.

Though the European Commission has steered away from the subject, saying it should be time-limited, the European Council said through its Bulgarian chair in January that there would be “flexibility” if more time was needed. In a joint press conference with chief negotiator Michel Barnier, Ekaterina Zakharieva, Bulgaria’s foreign minister, said the period could not be “endless” but that “negotiation directives and the declaration that was approved by the council allow for the flexibility in terms of this period in case we didn’t manage to achieve progress on the negotiations for the future”.