Germany’s Chancellor Angela Merkel has signaled she would rather see the UK leave the EU than compromise the free movement of immigrants, German magazine Der Spiegel reported.

The UK is nearing a “point of no return,” as British Prime Minister David Cameron attempts to renegotiate the terms of the country’s EU membership targeting the freedom of movement, Merkel reportedly said.

This was Merkel’s first hint that the UK’s exit from the union is a possibility, according to German media.

Cameron earlier said he wants to renegotiate the country’s EU membership before going through with a referendum on the subject, with the European principle of freedom of movement “at the very heart of my renegotiation strategy for Europe.”

Merkel has stressed that her support for UK membership could be reversed, if Cameron pursues migration reform.

Cameron has extended the EU laws “to their limits,” trying to turn away unemployed migrants and seeking deportation of those unable to make ends meet after three months, according to the report.

However, the UK’s Minister for Finance was not worried about the German Chancellor’s comments.

"I think it's a little bit thin," George Osborne said of the report in Der Spiegel, saying conversations with the German government had shown Berlin understood British public disquiet about unemployed EU migrants claiming welfare benefits. "The British public want this addressed. We are going to do this in a calm, rational way," he told the BBC.

A spokesman for Merkel, Steffen Seibert said that Germany isn't considering "hypothetical" scenarios and wants Britain to remain an "active and committed" European Union member but is insisting the principle of free movement of workers within the bloc isn't negotiable. He added that Berlin shares an interest in fighting "possible abuse" of free movement of labor but the overall principle mustn't be questioned, which was reported by AP.

Earlier in October, the former European Commission (EC) president Jose Manuel Barroso stated that freedom of movement is an essential principle of the EU, and any plan by Britain to cap the number of migrants through the limitation of national insurance numbers would be illegal under EU law.

READ MORE: Britain’s plan to limit EU workers ‘illegal’ – European Commission head

UK’s anti-immigration policies

With next year’s general election on the horizon, British politicians are talking tougher on the issue of migrant workers. It will be the first election since the anti-immigration Independence Party (UKIP) emerged as a serious political player.

The latest opinion poll revealed that support for UKIP has reached a record high following Brussels’ recent effort to levy a mammoth £1.7 billion ($2.7 billion) extra charge on Britain. Cameron has been forced to adjust his policies to win back public support.

READ MORE: EU funding row sparks huge surge in UKIP support – poll

Cameron announced plans to reduce the number of low skilled migrant workers coming to the UK from other EU countries by limiting the number of national insurance numbers given to them.

In the recent policy shift, he said EU migrants could now only claim benefits for a maximum of three months, down from six.

These legislative changes, which apply to child tax credit, child benefits and job seeker’s allowance, will be implemented in November.

Cameron is likely to make a speech on immigration policies before Christmas, according to media reports.

Meanwhile, the EC says it endorses the principle of free movement within the EU, where citizens have the right to work and live in all member states.