Theresa May is not “bluffing” by saying she is prepared to walk away from the European Union without a deal, Liam Fox said.
The International Trade Secretary said the economic impact of a “no deal” Brexit on EU members would be “severe”.
His comments came as pro-EU marchers prepared to take to the streets to show support for a referendum on the terms of Brexit secured by the Prime Minister.
Meanwhile research by the Centre for European Reform (CER) think tank indicated Brexit had already made the UK economy 2.1% weaker than it would have been if voters had decided to stay in the EU.
Dr Fox told the BBC: “The Prime Minister has always said that nothing is agreed until everything is agreed and that no deal would be better than a bad deal, and I think it’s essential as we enter the next phase of the negotiations that the EU understands that and believes it.”
He said the threat had “added credibility because if we were to leave, the economic impact on a number of European countries would be severe”.
“Countries like Ireland, countries like the Netherlands, countries like Belgium, would really feel the impact of that and that cannot be what the European Union 27 actually want to see,” he said, adding: “I think our negotiating partners would not be wise if they believed that the Prime Minister was bluffing.”
His comments in an interview to mark two years since the British people voted to leave the European Union were recorded before Airbus warned it could be forced to pull out of the UK if there was a “no deal” Brexit.
Meanwhile, organisers of the People’s Vote march expect tens of thousands of people to show their support for a referendum on the final Brexit outcome.
Marchers will descend on Parliament Square, where speakers will include Liberal Democrat leader Sir Vince Cable, Tory former minister Anna Soubry, Labour’s David Lammy and Green co-leader Caroline Lucas.
Sir Vince is expected to say: “Brexit is not a done deal. Brexit is not inevitable. Brexit can be stopped.
“Parliament is fiddling at the margins while the country slowly burns. ”
He will warn that Brexit will “slowly and painfully” damage the country.
“Theresa May admits there will be damage. Her policy is damage limitation,” he will say.
“Better to stop the damage. To return the issue to the people – to vote on the deal (or no deal).
“With the option of staying in the EU and working to improve it rather than walk away.”
The CER estimate of a 2.1% smaller economy than if the UK had voted to remain in the EU is equivalent to a knock-on hit of £23 billion a year to the public finances – some £440 million a week.
The think tank created a model using data from similar OECD economies including Canada, Japan, Hungary and the US to estimate how the UK would have performed if the referendum result had gone the other way.
CER deputy director John Springford said: “Two years on from the referendum, we now know that the Brexit vote has seriously damaged the economy.
“And we know that the Government’s ‘Brexit dividend’ is a myth – the vote is costing the Treasury £440 million a week, far more than the UK ever contributed to the EU budget.”