Britain could join a trade alliance with the US, Canada and Mexico if Brussels refuses to do a Brexit deal.
Ministers are said to be considering signing up to the North American Free Trade Agreement (NAFTA) as a way of offsetting any damage from an abrupt break with the EU.
The option has been floated as the government escalates its planning in case negotiations with Brussels fail.
Some senior figures now believe the chances of ‘no deal’ are 50-50, as talks increasingly seem to be heading for deadlock.
Brexiteers Boris Johnson and Liam Fox, pictured arriving at Downing Street for Cabinet today. Dr Fox’s International Trade Department has been planning for a ‘no deal’ outcome in the negotiations with the EU
US president Donald Trump (pictured with Mrs May at a NATO summit in May) has said he is eager to get closer ties to the UK after we leave the EU
Theresa May told MPs last night that the government was preparing for ‘every eventuality’ – including the possibility that the EU never agrees to engage on the terms of a new free trade deal.
NAFTA members have a combined GDP of more than £17trillion – compared to around £16trillion for the EU. Both US president Donald Trump and Canadian premier Justin Trudeau have said they are eager to get closer ties to the UK after we leave the bloc.
HM Revenue and Customs has set out the first detailed proposals for policing a new post-Brexit border in the event of no deal.
A white paper published by HMRC states that a new customs regime will be ready ‘from day one’ after Brexit, regardless of whether the EU agrees a trade deal.
Plans include the creation of new inland lorry parks to check imports without causing queues at major ports like Dover and Harwich.
A leaked document from the Department of International Trade also lays out radical contingency plans for leaving without a deal.
Ideas contained within the so-called ‘Project After’ document including dropping all import tariffs and becoming a champion of free trade. A senior government source last night said contingency plans would be stepped up after Christmas if Brussels continued to drag its feet.
Preparing the physical infrastructure for a new border regime is likely to cost several billion pounds and require the recruitment of thousands of staff.
‘It will be expensive, but we can do it and we will,’ the source said. ‘We don’t believe we will leave without a deal. But the EU has to understand that we are serious about going it alone if we have to.’
Mrs May, pictured chairing a discussion on race inequality after Cabinet today, is treading a delicate path between Brexiteers and securing a deal with the EU
In a statement to the Commons last night, Mrs May made clear the white papers on customs and trade paved the way for new laws ‘to allow the UK to operate as an independent trading nation and to create an innovative customs system that will help us achieve the greatest possible tariff and barrier-free trade as we leave the EU’.
She added: ‘While I believe it is profoundly in all our interests for the negotiations to succeed, it is also our responsibility as a Government to prepare for every eventuality, so that is exactly what we are doing.
‘These white papers also support that work, including setting out steps to minimise disruption for businesses and travellers.’
Mrs May also risked inflaming tensions with Brexiteers by saying the European Court of Justice would still be supreme during an ‘implementation’ period – and hinting that the length of the transition could be longer than the two years previously mooted.