The government will walk away from Brexit talks with the EU next week if there is not a visible path to a deal.
Boris Johnson had previously set a deadline of 15 October to make progress, with high levels talks expected next week, before a top-level meeting between European Commission chief Ursula von der Leyen.
According to Bloomberg sources close to the PM have said he is planning to quit talks next week if there is no progress.
But sources have also claimed that the EU is not willing to provide any more concessions to call Johnson’s bluff.
The EU27 are now prepared to drag trade talks out until November or December – even “taking a chance on Johnson pulling the plug” rather than compromise on their own red lines.
The comments came as cabinet office minister Michael Gove claimed that the UK is now stepping up preparations for the end of the transition period.
He said the UK will not be “held hostage” by the bloc over a deal.
“No one would be happier than me if we could conclude an agreement, but we have an absolute obligation to ensure that the country is ready in the event that we don’t.”
He added no-deal planning would ensure “that this country is not held hostage in a negotiation process.”