The British government brushed off a threat Thursday by its Northern Irish allies to withdraw their support if it compromises too much on Brexit, amid reports of progress in negotiations with the European Union.

The Democratic Unionist Party (DUP), which props up Prime Minister Theresa May's Conservative government, threatened to vote against the forthcoming budget if she makes a deal that disadvantages Northern Ireland.

The warning, amid continued opposition from May's own Conservative MPs to her Brexit strategy, further raised the stakes as negotiators seek a breakthrough ahead of a summit of EU leaders on October 18.

Scottish Minister David Mundell suggested the DUP would come around, saying the alternative was either a government led by opposition Labour leader Jeremy Corbyn or a Brexit next March without any deal at all.

"I'm sure they too will be persuaded the alternatives -- of no deal or potentially a Corbyn government -- would not be of benefit to them or Northern Ireland," he said.

May gathered selected members of her cabinet late Thursday to update them on the Brexit talks, and the Financial Times reported that she told them that a deal was drawing closer.

The issue of the Irish border, the major sticking point, was "close to being settled", it said. Downing Street earlier warned there were "big issues still to resolve".

DUP leader Arlene Foster, who has been in Brussels this week for talks with EU officials, repeated her warning that she would not accept anything that threatened the integrity of the UK.

"The prime minister is a unionist. Many of her cabinet colleagues have assured me of their unionism," she said.

"Therefore, they could not in good conscience recommend a deal which places a trade barrier on United Kingdom businesses moving goods from one part of the Kingdom to another."

- 'One-way turnstile' -

Talks on the divorce deal are stuck on how to keep the border open between Northern Ireland, which is part of Britain, and EU member Ireland to the south.

London hopes to resolve the issue with a future trade deal, but agrees there should be a "backstop" arrangement to avoid physical frontier checks until that deal is done.

The EU suggests Northern Ireland stay aligned with its customs union and single market during that period, and there are signs the British government could accept elements of this plan.

But this could see checks on goods travelling from mainland Britain to Northern Ireland -- what Foster described as "an effective one-way turnstile".

"Trade from Great Britain into Northern Ireland would be in danger of restriction. Indeed, Northern Ireland's access to any new United Kingdom trade deals would also be regulated by Brussels," she said.

If the DUP votes against the budget, which will be presented on October 29, this could trigger a confidence motion and a general election if the government loses.

May's Conservative party has relied on the DUP's 10 MPs to pass legislation since losing its majority in the House of Commons in the June 2017 election.

European Union proposals would keep Northern Ireland in its customs union and force the province to abide by European single market rules / © AFP/File

Former Conservative leader and Brexit supporter Iain Duncan Smith warned the prime minister she should "listen very carefully" to the DUP, which he said echoed many Tory concerns.

While May is reportedly ready to compromise on regulatory checks between Northern Ireland and mainland Britain, she has refused the idea of a customs border in the Irish Sea.

Instead she proposed Britain as a whole stay temporarily aligned with the EU's customs union until a wider trade deal is agreed.

Eurosceptic Conservative MPs who want a clean break with the EU have expressed alarm at reports that, as it races to get a deal, the government may agree this alignment would last indefinitely.

"Clearly Number 10 are negotiating a 'backstop' that makes the UK a permanent EU colony," former foreign minister Boris Johnson warned on Wednesday.