Papers drawn up by its finance department say the Government does not expect Boris Johnson or Brussels to back down in the row over the Irish border backstop. The claims emerged as Chancellor of the Exchequer Sajid Javid held talks in Berlin with German finance minister Olaf Scholz. Mr Javid warned his counterpart that Britain is serious about leaving without a deal if the EU refuses to budge on the terms.
Germany holds crucial sway over the approach taken by Brussels.
Mr Johnson could meet Chancellor Angela Merkel to discuss Brexit next week ahead of a G7 summit.
"The UK will definitely be leaving the EU on October 31 - it is in our mutual interest to do so with a deal, but we will be ready to leave with no deal," Mr Javid said yesterday after the meeting.
Constitutional expert Vernon Bogdanor said no deal is now the "most likely outcome".
"The default position is that we leave the EU without a deal and so I suppose that is the most likely outcome," he told the Politico website.