Theresa May must prepare to exit the EU with no deal to have “real leverage” in Brexit negotiations, a letter from 60 politicians and business figures says.
The prime minister should also reserve the right to “take with it the £39bn it has offered to pay as part of a divorce settlement”, it says.
Signatories urge the government to accelerate plans to operate under World Trade Organisation (WTO) rules.
Downing Street said it was confident the UK would get a good deal.
Former cabinet ministers, economists and business figures including former chancellor Nigel Lawson, vocal Brexiteer John Redwood, and Wetherspoon chairman Tim Martin signed the letter.
It was organised by Economists for Free Trade (EFT) and asks Mrs May to warn the EU that despite its “intransigent and punitive stance” Brexit cannot be stopped.
“We believe you could also make clear that your preferred outcome is a free trade deal between Britain and the EU, an arrangement that is to the mutual benefit of both parties,” the letter says.
It goes on to say that even though a free deal trade is “eminently possible”, it believed it was “time” to move to a World Trade Deal under WTO rules “in light of the reluctance of the EU swiftly to secure a free trade deal”.
Britain is due to leave on 29 March 2019, 46 years after it first joined the European Economic Community, the forerunner to the EU.
BBC political correspondent Ben Wright says the letter is “a sign of how frustrated hardline Brexiteers are becoming”.
He adds: “The letter shows how intense the pressure is for Mrs May not to compromise, from some in her own party.”
What would WTO rules mean?
The UK wants to negotiate a “comprehensive, bold and ambitious” free trade agreement with the EU.
If it can’t achieve that, there are a number of other possible arrangements of varying depth before the UK reaches the point where it has no preferential trade relationship with the EU other than common membership of the WTO.
If the UK had to trade under WTO rules, tariffs – a tax on traded goods – would be applied to all UK exports.
The average WTO tariff varies from product to product, from 0% on mineral fuels and pharmaceuticals, to around 20-35% on processed food and 45-50% on meat.
The warning from well-known Brexit supporters comes after tens of thousands of people marched in central London, demanding a final vote on any UK exit deal..
On Friday, plane-maker Airbus – which employs 14,000 people in Britain – said it could leave the UK if it exits the single market and customs union with no transition deal.
Car maker BMW also warned that clarity is needed on a trade deal by the end of the summer, potentially affecting the company’s 8,000-strong staff in the UK.
In the letter, EFT says Britain can “flourish, even without a free trade deal, because of benefits of leaving the EU”.
“This would give the chancellor ample scope to increase spending on priority public services such as the NHS, while reducing the too high UK tax burden.”
Earlier this week, Theresa May said a so-called Brexit dividend could be used to fund part of an extra £20bn a year for the health service.
Although the Office for Budget Responsibility (OBR) calculates the UK will begin saving £3bn a year by 2020, this does not take into account Britain’s expected £39bn divorce bill for exiting the EU.
When asked about the EFT’s letter, a Downing Street source said: “We are confident of getting a good deal that delivers for every part of the UK and allows us to take back control of our money, rules and borders.”