Andy Burnham is open to cutting university fees for EU students if the UK gets substantial concessions on trade in return, The i Paper has learned.

Brussels has long demanded that the UK agree to lower tuition fees for EU students as part of a youth mobility deal for under-30s visas that would also unlock key agreements on food and drink trade and energy markets.

But the UK has so far resisted this, as universities warn it would blow a hole in their already cash-strapped budgets, as it would mean EU students paying home fees – £9,790 in the next academic year – rather than much higher international fees of up to £38,000.

However, The i Paper understands that the Prime Minister and his new EU Relations Minister Hamish Falconer are open to cutting tuition fees for European students – but only as part of a grand bargain that would see the UK getting significantly improved trading terms with the bloc.

London has previously floated the idea that the UK could be included in a bespoke single market for goods with the EU but this was rejected by Brussels.

The level of concessions being sought by Burnham is likely to include a carve-out for the UK from protectionist EU “Made in Europe” policies that threaten British industries and more single market access in different areas to those being negotiated.

Falconer has not yet worked out exactly where the balance will lie and is developing his strategy for the negotiations and trade-offs ahead of an expected UK-EU summit around October or November.

Some EU countries, like Germany, are understood to believe that “Made in Europe” policies must include British companies to ensure the health of the continent’s economy. However, other nations, believed to include France, are more protectionist and believe the UK should be cut out and not be granted special deals in the wake of Brexit.

Burnham and Falconer’s approach to the talks is in line with Starmer and his former Brexit reset minister Nick Thomas-Symonds’ approach. It may disappoint Europhiles who had been hoping the new Prime Minister would rip up Labour’s red lines that keep the UK out of the EU single market, customs union and free movement area.

Thomas-Symonds alluded to what the UK wants in return for conceding on university fees in a 23 June speech on the 10th anniversary of the Brexit vote.

He said the UK is “slap bang in the middle of the tariff and protectionist crossfire” between major trading blocs and insisted the EU is our “biggest trading partner with whom our supply chains are intrinsically linked”, calling to “protect our continent’s economy”.

Burnham faces the prospect of coming under pressure over Brexit at his first Labour Party conference as leader in September.

A motion is being circulated among Labour’s grassroots which could make it on to the conference floor. It calls on the Prime Minister to “rip up the red lines on Europe” and align more closely with the EU to remove trade barriers and support national security.

Labour MP Andrew Lewin, who chairs the cross-party UK Trade and Business Commission, urged Burnham to strike a youth mobility deal with the EU to unlock closer cooperation with Brussels.

He told The i Paper: “No 10 has said they will run towards problems neglected for too long. With the UK-EU relationship, they can run towards an opportunity.

“I hope the Prime Minister makes it a priority to finalise a UK-EU youth mobility deal, so we can make good on the promise of allowing 18-30 year olds to travel freely across the European Union.

“The Treasury will recognise that a youth mobility scheme will be a pro-growth measure and with overall migration sharply down, there is no reason at all for the Home Office to object.

“While many of us in the Parliamentary Labour Party (PLP) would like to see UK-EU ties strengthened much further, getting this deal over the line this year would be a very good first step.”

A Cabinet Office spokesman said: “We are building an ambitious, close relationship with the EU that will strengthen our economy and unlock growth in every postcode.”