The U.K. need not cut its trade and economic ties with the European Union if it seeks a deal that's somewhere between the current single market and the World Trade Organization rules, a German minister told CNBC.
However, the British government has to be aware that it needs to compromise Jens Spahn, Germany's deputy finance minister told CNBC on Monday.
"Who wants to have access to the internal market needs to accept the rules of the internal market and one of the rules is the freedom of movement," he said.
"So if migration is an issue and I totally understand that then it's going to be hard to have access to the internal market."
The U.K.'s prime minister, Theresa May, is due to outline her Brexit priorities at a speech on Tuesday. Expectations are that she will seek to control the number of people entering the country -- even if that means restricting the access that U.K. businesses have to the European common market.
According to Spahn, the EU and the UK need to work on a new relationship that is something between "what we have today and just WTO (World Trade Organization) rules."
If the UK opts for breaking away from the EU completely, business from both sides will still be able to trade, however this will have to be under WTO rules which implicates higher costs.
Spahn is confident that a deal between the UK and the EU will be achieved, but the British government needs to be open.
"But of course the more access you want, the more trade you want, the less rules you want for cross border trade, the more you need to be open for compromise," Spahn, who works with the German finance minister Wolfgang Schuable, told CNBC.
He downplayed comments from President-elect Donald Trump that Germany's migration policy, a key issue for the upcoming federal election, was a "catastrophic mistake."
"Of course it was not," Spahn said, but the debate isn't something "new for us."
The EU has seen an unprecedented influx of migrants, some of them escaping conflicts in the Middle East. At the peak of the migration crisis, the German chancellor Angela Merkel said she would not close her borders – a controversial policy amid rising support for populist views in the largest euro economy.
"Of course you can debate … how quickly we were at the European Union to secure our European border, that's actually what it has to be about," Spahn suggested.