Downing Street is drawing up a “nuclear option” of halting all payments to Brussels immediately if Brexit talks break down.

Britain is liable to pay £18 billion a year into the European Union budget until its official date of departure from the bloc, expected to take place in March 2019, and British negotiators have shown willingness to pay into the budget for a further two years, until the end of the current seven year budget cycle, to gain good will for future trade talks.

But with European leaders’ demands spiraling to payments of €100 billion to cover “political commitments”, and good will rapidly dissipating between the negotiating parties, insiders are drawing up plans for Britain’s own hard-ball tactics – including pulling the plug on financial contributions completely.

A senior Conservative source has dubbed the idea “the nuclear option”, telling The Sun: “Ceasing our contributions is not a threat No. 10 want to make yet, but it has certainly been discussed”.

The report comes just one day after the Prime Minister, Theresa May told reporters: “We continue to believe that no deal is better for Britain than a bad deal.”

Speaking on the doorstep of 10 Downing Street, fresh from an audience with the Queen to request Parliament be officially dissolved, May hit back at Brussels’ leaks and meddling, which she had been “deliberately timed” to influence June’s general election.

“In the last few days, we have seen just how tough these talks are likely to be,” she said.

“Britain’s negotiating position in Europe has been misrepresented in the continental press.

“The European Commission’s negotiating stance has hardened.

“Threats against Britain have been issued by European politicians and officials.

“All of these acts have been deliberately timed to affect the result of the general election.”

But, she added: “we want a deal. We want a deep and special partnership with the European Union.”

Across the Channel a rift is opening up between the European Commission, which has taken a very strong line against Brexit, and European leaders who understand that their countries stand to lose if Brexit negotiations fail.

The EU’s chief negotiator Michael Barnier has played down suggestions that the EU will seek to impose a Brexit bill of as much as €100 billion, saying that no figure had yet been reached, and that any money paid would not be “an exit tax or punishment”. However, he added that the “divorce bill” must be paid in full, warning of “legal consequences” if it is not.

Meanwhile, Martin Selmayr, chief of staff to Commission president Jean-Claude Juncker – thought to be the man behind a number of anti-Brexit briefings – hit back at May’s speech, immediately saying Brexit “will never become a success as it is a sad and sorry event.”