Kemi Badenoch has suggested the UK needs to diverge from EU rules to make Brexit worthwhile, amid concerns from Tory backbenchers that changes will be limited as part of efforts to restore devolved government in Northern Ireland.

The Business Secretary did not deny when challenged that the Government could make concessions on regulation to reduce trade barriers with Northern Ireland.

She said she was not a participant to Northern Ireland’s “political process” and so could not comment, but also stressed the need to find a “comparative advantage” over the EU in terms of regulation in order to “seize the benefits of Brexit”.

The Government is seeking to restore the Northern Ireland Assembly, which will require the Democratic Unionist Party to end its boycott on participation – a move likely to require alleviating some of the party’s concerns over post-Brexit trading arrangements.

Speaking in the Commons, Conservative former cabinet minister Theresa Villiers said: “Is (Ms Badenoch) in a position to deny a report in The Telegraph today that the Government has pledged to introduce a requirement that all future regulatory law change will be screened to ensure that they don’t create extra trade barriers in the Irish Sea?

“Because that could be a significant impediment in the way of divergence from EU laws.”

Ms Badenoch responded: “I can’t, of course, comment on the Northern Ireland political process which is ongoing, and which I am not a participant to.

“However, what I will say is that we retain the ability to diverge. That is clear. And I do agree with her that if we are really to seize the benefits of Brexit we need to find that comparative advantage in our regulations with the EU, otherwise there would be no point.”

She added: “I was the Business Secretary who made sure there was transparency in what we were doing around EU regulations rather than an invisible bonfire, I was the one who ended jurisdiction of the European Court on January 1, and we do have a comprehensive deregulation programme which I am pushing.

“I do understand her concerns, I will speak to colleagues across departments and make sure they are raised at the highest level.”

The Telegraph reported that Rishi Sunak has offered to introduce a requirement for all new laws to be screened to ensure they do not create new trade barriers in the Irish Sea.

The paper also reported the idea had been met with anger by some on the Tory backbenches, and quoted Conservative former cabinet minister Sir Jacob Rees-Mogg as saying: “This means we will not diverge at all.”

Downing Street did not deny the claims on divergence, with the Prime Minister’s official spokesman saying: “I’m not going to comment on speculation around private discussions – all I would emphasise is we will of course retain the ability to diverge, we will not lose that, we will retain the freedom and powers that the British people voted for.”