The EU’s new trade chief has said the bloc could consider including the UK in a pan-European trade agreement, but emphasised that “the ball is in the UK’s court”.

While the UK’s Labour government has ruled out returning to the single market and customs union after Brexit, the possibility of joining a continent-wide deal could open the door to closer cooperation with the EU and bolster much-needed economic growth.

Maroš Šefčovič, who led post-Brexit negotiations for the EU, told the BBC that allowing the UK to join the Pan-Euro-Mediterranean convention (PEM) was “something we could consider”.

PEM is an agreement was originally agreed in 2012 and allows goods to flow tariff-free across borders. Members include the EU, as well as some north African countries, Switzerland, Norway, Georgia and Ukraine.

Some businesses have supported UK joining PEM, saying it could help their complex supply chains, cut red tape and improve trade.

The UK’s food and farming industry could benefit from such a move. “We would have to have the same rules and we have to upgrade them at the same time, we call it dynamic alignment,” Šefčovič said, speaking at the World Economic Forum meeting in Davos, Switzerland.

Šefčovič, who is commissioner for trade and economic security, admitted that the idea had not been “precisely formulated”, but said that the “ball is in the UK’s court”, putting pressure on Keir Starmer to decide on a position on closer trade ties with the bloc.

Starmer’s government hopes to “reset” ties with Brussels after taking power last year.

Membership of PEM was ruled out by the previous, Conservative government, but Labour ministers are reportedly starting to consult businesses on the benefits of taking part, according to the BBC.

Šefčovič, who took up the trade chief position late last year, said UK-EU relations were “definitely” in a better place and that his British counterpart Nick Thomas-Symonds, the minister in charge of EU relations, was “on speed dial”.

Asked about Šefčovič’s suggestion on BBC Radio 4’s Today programme, the housing minister Matthew Pennycook said the UK government was “not seeking to participate in that particular arrangement”.

However, a Downing Street spokesperson did not rule out joining the PEM scheme. When asked whether joining PEM would cross the “red lines” set out in Labour’s manifesto for EU ties, he said: “The arrangement that’s been discussed is not a customs union.

“Our red line has always been that we will never join a single market, freedom of movement, but we’re just not going to get ahead of those discussions.”

Jonathan Reynolds, the business and trade secretary, appeared open to possible PEM membership, welcoming Šefčovič’s comments. “It is obviously not a customs union,” he said in Davos. “It’s not an EU thing.”

He said: “I mean Morocco, Algeria and Egypt, I think, are all part of it, as well as Tunisia, Liechtenstein and Switzerland. So it’s a wider set of arrangements that do help in some sectors.”

The Labour MP Stella Creasy, who is also the chair of the party’s affiliated campaign group, the Labour Movement for Europe, supported the potential deal. “Red tape from Brexit hits British business in many ways – joining PEM would help cut the paperwork connected to rules of origin requirements which is why we have long argued it should be a priority for the UK as one way to undo the damage to trade leaving the EU has done,” she said.

Reynolds said joining PEM would not solve the UK car sector’s challenges with the current trade and cooperation agreement.

He added: “We haven’t ever proposed ourselves that we joined … some sectors would benefit, some wouldn’t. But look, what I really welcome in that positive tone is a recognition that we should be ambitious”.

Earlier this month, the Lib Dem leader Ed Davey used a speech in London to say that a customs union with the EU would be “the single biggest thing we can do to turbocharge our economy in the medium and long term”. He also argued that closer links with the EU in trade and defence could help the UK “Trump-proof” itself against the US president’s second term.