The prime minister made the major concession after the EU signalled the final deadline for a deal is Wednesday – despite insisting the UK would “prosper” without an agreement.
In a statement, the government said it would take out the clauses if the “solutions being considered” in the separate talks over the operation of the Northern Ireland Protocol bear fruit.
Nevertheless, the move will be seen as an attempt to kick-start the troubled trade talks and as a significant climbdown, after ministers insisted the measures were necessary as “a safety net” – regardless of whether a deal was agreed or not.
The Internal Market Bill provoked uproar in the EU, by paving the way to override the withdrawal agreement on the use of state aid and the customs checks required on goods crossing the Irish Sea.
Mr Johnson was accused of bringing a no-deal Brexit significantly closer and of undermining the still-fragile peace in Northern Ireland.
In the new statement, the government said it would – if agreement can be reached on the Northern Ireland Protocol – “be prepared to remove clause 44 of the UK Internal Market Bill, concerning export declarations”.
It added: “The UK Government would also be prepared to deactivate clauses 45 and 47, concerning state aid, such that they could be used only when consistent with the United Kingdom’s rights and obligations under international law.”
The statement also offered an olive branch over a second Bill that would break the withdrawal deal – the Taxation Bill, concerning East-West checks in the Irish Sea – which is due to be published on Tuesday.
“Good progress continues to be made regarding the decision as to which goods are ‘at risk’ of entering the EU market,” it states.
“Talks continue this afternoon. In the light of those discussions, the government will keep under review the content of the forthcoming Taxation Bill.”
Dropping the clauses had always been the most likely outcome if a deal is struck – when they become partially redundant anyway – but the UK government appears to be making a peace bid by making that assumption explicit.
Both sides agree they remain far apart on the crunch disputes of fishing rights, fair competition rules – to prevent the UK undercutting the EU – and how to resolve future disputes.
Claims of a deal being close on fishing have been rejected and Michel Barnier, the UK’s chief negotiator, is believed to have said the so-called ‘level playing field’ rules are the biggest stumbling block.
A crash-out Brexit would delay the UK’s recovery from the Covid-19 pandemic by a further year, the Office for Budget Responsibility warned last month.
Mr Johnson and Ursula von der Leyen, the European Commission president, are holding make-or-break talks, to try to break the impasse.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies