The Daily Express has learnt that international trade secretary Liam Fox has told friends that his department is preparing the case on how no deal is better than EU membership.
The revelation comes amid growing frustration with the intransigence of the European Commission in the Brexit talks.
Commission chief negotiator Michel Barnier has warned that he may not move the talks on to discussing a trade deal in October because the UK refuses to accept the EU divorce bill demand of £78 billion.
It also follows a senior government minister telling the Daily Express over the summer that the UK is considering walking out over the EU’s intransigence that Britain has to accept the jurisdiction of the European Court of Justice.
Senior Brexiteers believe that if trade talks are postponed then there is little value in talking to the EU and instead the UK should quit the talks.
It is understood that at a gathering last week Dr Fox was “sympathetic” to that view and said that he is “my next project is give the case for WTO [World Trade Organisation] rules.”
The reference to “WTO rules” is the position the UK will be in if there is no deal where World Trade Organisation rules on tariffs limits will come into play instead of the free market.
If the UK was on WTO rules now it would mean that UK exporters to the EU would pay £5 billion but exporters from the EU to the UK would pay £13 billion.
This means that the Treasury could still make a profit of £3 billion and find ways to fully compensate UK exporters for the new EU tariffs.
Once out of the EU, Britain is also free to deregulate and sign its own free trade deals around the world.
Former British Chambers of Commerce director general John Longworth has estimated that simply by going to WTO rules will boost the British economy by £150 billion a year.
The toughening of the UK stance follows Mrs May refusing to sack members of the government who signed a letter demanding that the UK leaves the EU and all its institutions by the end of March 2019.
In response to demands by Remainers for a purge, she himted at a gathering of Tory MEPs that she agrees with the letter and “Britain will leave” at the end of March 2019.
The latest reports come amid growing determination among Tory backbenchers to block ministers from paying a large divorce bill to the EU.
There had been reports, denied by the Government, that Theresa May is prepared to pay up to £50 billion after pressure from Remainers in the cabinet including Chancellor Philip Hammond.
However, senior Tories have said they intend to block any significant payment in the Commons.
Leading Brexiteer and former cabinet minister John Redwood said: “I can’t see many voting for it.”
Labour MP Kate Hoey, another Brexit supporter, said: “If you quit a club you stop paying.”
Meanwhile, Mrs May has used the 50th anniversary of Gibraltar National Day to warn off Spain and the EU from trying to tie its future in with Brexit.
After a bid by Brussels to link Spain’s claims to the Rock early in the process, the Prime Minister has made it clear it will not form part of the talks.
In a message to Gibraltar she said it will remain British for “as long as it chooses to do so” and will be “fully involved” in Brexit talks.
The Prime Minister sought to give assurances to the British overseas territory in a message broadcast to mark Gibraltar National Day.
Spain has a long-standing territorial claim on Gibraltar, which has been held by the UK since 1713 and has the status of a British overseas territory.
Mrs May said: “As the UK negotiates to leave the European Union, Gibraltar will be fully involved.
“As we face the opportunities and challenges to come, the UK will continue to stand firmly beside you. We will resolutely safeguard Gibraltar, its people and its economy.
“And Gibraltar will remain British for as long as it chooses to do so.”
September 11th, 2017: Express