The government has consulted lawyers over the EU's preparations for a no deal Brexit, claiming they pose a risk to British businesses and are in breach of the UK's rights as a member state.
Brexit secretary David Davis wrote to Theresa May last month claiming that the EU's plans could jeopardise contracts and force firms to relocate to the continent, according to the FT.
These scenarios are ones that the government has itself warned of, however Davis told the Prime Minister the government "cannot let these actions go unchallenged" – although was cautious about making any formal move.
"Any legal action would be high risk politically and financially, and may not conclude until after we exit," he wrote.
Davis also wrote that he plans to ask the European Commission to update its guidance to business, to emphasis the potential for a future trade deal.
Pat McFadden MP, leading supporter of pro-EU campaign group Open Britain, said: “The government is implicitly threatening a no-deal scenario. It should come as no surprise that the EU is also preparing for this possibility.
“It seems extraordinary that the government is exercised about the EU preparing for a no deal scenario when it has set aside £3bn in its most recent Budget to do exactly the same thing.”