Sterling falls to two and a half year low, after Boris Johnson's government signals that Britain is heading for a no-deal Brexit.

The prime minister's spokeswoman on Monday said the government "must assume" a no-deal Brexit is on the cards.

Johnson has refused to meet with EU leaders until they drop their longstanding negotiating red lines.

The prime minister later sought to downplay the fears of a no-deal insisting that a deal could still happen if there was "goodwill" from the EU.

The pound has plummeted to a two and a half year low, as senior members of Boris Johnson's cabinet signal that Britain is heading for a no-deal Brexit in October.

Johnson's de facto deputy Michael Gove will chair an emergency meeting of senior Cabinet ministers on Tuesday afternoon, to co-ordinate UK preparations for leaving the EU without a deal.

The meeting comes after Gove suggested on Sunday that the UK is operating "on the assumption" that Britain is heading for a no-deal exit, while the Foreign Secretary Dominic Raab said that the "balance has shifted" towards leaving without an agreement.

Johnson's spokeswomen said on Monday that he would not even meet with EU leaders to discuss a deal until they ditched their longstanding negotiating red lines.

She added that the government "must assume" that a no-deal Brexit was on the cards.

"The European Union has said up to now it's not willing to renegotiate that so we must assume there will be a no-deal Brexit on October" she said.

The comments triggered Sterling to fall to a two and a half year low, as investors turned away from the UK.

Johnson later sought to downplay fears that Britain is heading for a no-deal Brexit, insisting that his previous prediction that a no-deal exit was a "million-to-one" chance, still stood.

Johnson said he was willing to go the "extra thousand miles" to agree a new Brexit deal with the EU.

The prime minister will on Tuesday begin the second leg of his tour of the United Kingdom's nations when he heads to Wales to meet with the Welsh First Minister Mark Drakeford.

The trip comes after Johnson received a hostile reception in Scotland, where he was booed by large crowds as he arrived to meet with the Scottish First Minister Nicola Sturgeon.

WATCH: Boris Johnson booed in Scotland as he meets Nicola Sturgeon

The prime minister subsequently left by the back door in an apparent attempt to avoid the crowd.