THERESA May will update her divided Cabinet on the Brexit deadlock as Brussels warned Britain is “more likely than ever before” to crash out of the European Union without a deal.
The Prime Minister has insisted an exit agreement is still “achievable” despite negotiations stalling just days ahead of a crunch summit.
European Council president Donald Tusk said that while there was goodwill on both sides, the negotiations have been more complicated than expected.
A group of Cabinet ministers met on Monday evening to discuss the developments, with Foreign Secretary Jeremy Hunt, Brexit Secretary Dominic Raab and Environment Secretary Michael Gove among those who attended according to reports.
Lord Hague, meanwhile, told the PM there was “no disgrace in doing some fresh thinking” on how to resolve the stalemate.
Mrs May will address the leaders of the remaining 27 EU nations on Wednesday before they discuss over dinner without her how to proceed in the talks.
In a letter to EU leaders ahead of the summit, Mr Tusk said: “As things stand today, it has proven to be more complicated than some may have expected.
“We should nevertheless remain hopeful and determined, as there is good will to continue these talks on both sides.
“But at the same time, responsible as we are, we must prepare the EU for a no-deal scenario, which is more likely than ever before.
“Like the UK, the Commission has started such preparations, and will give us an update during the meeting.”
He added: “But let me be absolutely clear. The fact that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible, for all sides.
“This is what our state of mind should be at this stage.
“As someone rightly said: ‘It always seems impossible until it’s done’. Let us not give up.”
Ex Brexit minister Steve Baker told Newsnight that the Cabinet needs to “change the Prime Minister’s mind” on her plans or they will be rejected.
Mrs May called for “cool, calm heads to prevail” after talks last weekend failed to bridge differences between the UK and EU over the future status of the border in Ireland.
And she warned of the danger that failure to reach agreement over the border could result in the UK leaving the EU without a deal in March next year.
The EU Council meeting this week had initially been pencilled in as the summit where the UK’s withdrawal agreement and political declaration on future trade and security relations would be finalised.
Lord Hague said Mrs May was entitled to make clear to EU leaders that she has “moved heaven and earth to reach a deal” but can only clinch it and have any hope of getting it through Parliament with concessions from them that are “wholly reasonable”.
“There is no humiliation in trying again,” he wrote in The Daily Telegraph.
Lord Hague went on to say there is “no disgrace in doing some fresh thinking”.
The peer said a proposal floated by Tory MP Nick Boles that the UK takes up temporary membership of the European Free Trade Association after withdrawal to allow time for a free trade agreement to be negotiated was worth thinking about.
He said: “As an alternative to chaos it could command wide support.”
German Chancellor Angela Merkel said Berlin wants the UK’s withdrawal next March to be orderly “but not at any price”.
But Sammy Wilson, Brexit spokesman for the DUP, which props up Mrs May’s minority administration in the House of Commons, said a no-deal outcome was now “probably inevitable” due to the “intransigence” of EU negotiators.
Talks at the weekend foundered over the EU’s demand for a “backstop to the backstop” designed to ensure the border between Northern Ireland and the Republic remains open under any circumstances.
The PM met with Sinn Fein leader Mary Lou McDonald and vice president Michelle O’Neill and “reaffirmed her commitment to there being no hard border between Northern Ireland and Ireland and no border in the Irish Sea”, Downing Street said.
The PM told MPs the Irish issue must not be allowed to “derail” progress towards a deal, which she said was in the interests of both the UK and EU.
Labour leader Jeremy Corbyn dismissed Mrs May’s comments as “another ‘nothing has changed’ moment from this shambles of a Government”.