The Brexit deal for Northern Ireland will not be “sustainable for long” if it continues in its current form, the UK government minister responsible for EU-UK trade relations has warned following a two-day visit to the region.

Lord David Frost warned that the Northern Ireland protocol, which requires all goods travelling from Great Britain into Northern Ireland to conform to complex EU customs rules, was still presenting “significant challenges” for businesses and urged the EU to take a “common sense” approach to its implementation.

“Businesses have gone to extraordinary efforts to make the current requirements work, but it is hard to see that the way the protocol is currently operating can be sustainable for long,” he said in a statement released after the visit.

The protocol has been one of the most contentious aspects of the UK’s separation from the EU and is the subject of a legal action from the European Commission over the full implementation of the deal.

Frost’s statement points to continuing divisions between London and Brussels over the deal that prime minister Boris Johnson signed in order to deliver Brexit without the need for a north-south trade border on the island of Ireland.

The British government in March unilaterally extended “grace periods” designed to smooth the transition to the new trading arrangements, arguing that businesses needed more time to adjust.

The protocol has been rejected by all the mainly protestant Unionist political parties and caused deep political disputes in the region.

It was blamed in part for several nights of rioting in mainly Loyalist areas of the region over Easter and for the downfall of Arlene Foster, the leader of the main Democratic Unionist party, whose successor will be elected on Friday.

The commission and the UK government are in negotiations to try to resolve their differences over the implementation of the deal, but officials on both sides admit they remain far apart, particularly on the question of rules covering animal and plant products.

Frost added the government remained committed to working through the issues “urgently and in good faith” and urged the EU to take a “risk-based approach” that would limit the levels of physical checks required on goods travelling from Great Britain to Northern Ireland.

However, Frost warned that unless the EU sought solutions that minimised disruption to the everyday lives of people in Northern Ireland, then the UK would “continue to consider all our options” to preserve peace in Northern Ireland.

A senior EU diplomat said that while the commission was keen to find technical solutions, it was determined to take an “orthodox approach” that would limit any trade facilitations only to what was possible under the basis of existing EU laws.

Northern Ireland business groups who met with Frost said they supported a risk-based approach that relied on modern, supply-chain technology to track goods and demonstrate that they were not at risk of “leaking” across the border into the Irish Republic and the EU single market.

Aodhán Connolly, director of the Northern Ireland Retail Consortium, said after meeting with Frost that the group had made clear the challenges businesses were facing in maintaining the flow of goods and relationships with GB suppliers.

“We were clear that there is a need for an auditable and certified supply chain to remove friction on SPS [animal and plant products] and other goods. But that will take ambition from both the UKG [UK government] and the EU and a willingness to work together and with NI business,” he added.

Trade groups also warned there was now limited time for the EU and UK to reach an arrangement before new systems were introduced in October and before the politically sensitive summer months, with the so-called marching season, when the region’s Protestant Orange Order holds traditional parades, adding to the risk of political disturbances.

Stephen Kelly, chief executive of Manufacturing Northern Ireland, said a survey of members had shown a marked decline in confidence between February and April that the protocol could be made to work.

“The business community remains committed to making the protocol work, but confidence is falling, which is worrying. Both sides need to work together to make this deal work, because if the business community loses faith in the protocol, the risk of unilateral actions rise,” he said.