The Prime Minister’s order came after David Davis warned ministers that EU members must realise Britain is prepared to go it alone if negotiators cannot thrash out a good Brexit deal.
The Brexit Secretary told the Cabinet: “Britain will only land a good trade deal if the remaining 27 members believe we really are prepared to go it alone without any agreement.”
Ministers have now been tasked with drawing up new legislation for post-Brexit Britain if negotiators cannot draw up an agreement that suits both the UK and the EU.
Mr Davis has labelled the planning as “the most important peacetime operation” the Government has ever dealt with.
Downing Street said the Cabinet discussion showed the Government was preparing for “the unlikely scenario in which no mutually satisfactory agreement can be reached”.
A spokesman for Theresa May said: “The message was that we are not going to fail, but it is important that departments understand the challenges ahead”.
However, there are fresh fears that Brussels bigwigs could try to force an unfavourable deal on Britain.
A senior Cabinet source said: “The EU has to be believe we’re prepared to walk away, so that makes getting the legislation in place so that we can.
“It’s going to be a very intense two year game of bluff.”
The news comes after Boris Johnson offered his support to Mrs May following a scathing attack by former PM Sir John Major, who said the Government had led the British people to expect an “unreal and overoptimistic” post-Brexit future.
The Foreign Secretary said: “Sometimes I get a bit impatient when I hear people droning and moaning about the state of the world.
“And I hear them warn the sky is about to fall on our heads. And I feel like saying, ‘come off it, sunshine’.”