Open Europe said that when it comes to trade in goods, the single market was a “significant achievement” and that it “makes sense” to stay in line with its rules and regulations.
The group took a different view about trade in services, for which it said the UK should look to diverge from Europe and focus on the rest of the word.
The report was edited by Open Europe’s director Henry Newman, ex-political advisor to Mr Gove, who accepted that the report’s conclusions might “upset hardline Leavers and extreme Remainers”.
It comes as the cabinet is still struggling to form a plan for future customs relation, with ministers failing to agree which approach to take and the EU so far rejecting all the UK’s proposals.
Mr Newman said: “Open Europe’s blueprint recognises that the UK is too big an economy to be a rule-taker in areas like financial services, while accepting that we can get a very good degree of access in goods by giving up a limited amount control.
“The country decisively voted to leave and we cannot be 52 per cent out and 48 per cent in, but we can and should aim for a close economic relationship with our nearest neighbours.
“This report may upset hardline Leavers and extreme Remainers, but they do not represent the pragmatic position of the vast majority of the population and of businesses.”
The report, backed by ex-Tory chancellor Lord Lamont, stated that the single market in goods “is far more developed than services and was a significant achievement of British EU membership”.
It went on: “We believe it makes sense broadly to maintain alignment with its rules.”
The report pointed out that the EU is the UK’s most important goods market and says that the most highly regulated sectors – electrical, automobiles, and chemicals – are the areas of highest trade volume and of greatest growth.
It argued that while there might be some benefit from regulatory divergence, overall the think tank judged that the government should commit to maintaining the body of regulation relating to goods.
Its report added: “There should be an assumption that future goods regulations are followed by the UK, but this process would not be automatic.
“It would be open to the UK, as a third country, to decide not to follow a particular new regulation, knowing that this could affect market access and ultimately potentially the broader agreement.”
It went on to highlight that services make up 80 per cent of the UK’s economy but that much of this trade was more globally focused.
The report concluded: “We cannot simply be a rule taker in key industries such as financial services. The approach on services therefore should be about managing divergence.”
Ministers are under pressure to come up with some commonly agreed proposals that are acceptable to Brussels by the European Council summit meeting towards the end of the month.