Theresa May has been accused by a powerful parliamentary committee of putting the national interest at risk by failing to prepare for the “real prospect” that two years of Brexit negotiations could end with no deal.

The criticism – and warnings of dire consequences – is levelled at May by the all-party foreign affairs select committee only days before she is expected to trigger article 50 – the formal process that will end the UK’s 44-year membership of the European Union.

After a detailed inquiry into what would happen if Brexit negotiations failed, the Tory chairman of the committee, Crispin Blunt, a supporter of leaving the EU, said: “The possibility of ‘no deal’ is real enough to require the government to plan how to deal with it.

“But there is no evidence to indicate that this is receiving the consideration it deserves or that serious contingency planning is under way. The government has repeatedly said that it will walk away from a ‘bad’ final deal. That makes preparing for ‘no deal’ all the more essential.

“Last year, the committee described the government’s failure to plan for a leave vote as an act of gross negligence. This government must not make a comparable mistake.”

His committee’s report says Brexit talks could break down for several reasons, including a deal being torpedoed at the 11th hour by the European parliament. The UK would be cast adrift and have to trade on World Trade Organisation rules, an outcome that would risk serious economic damage.

“It is clear from our evidence that a complete breakdown in negotiations represents a very destructive outcome, leading to mutually assured damage to the EU and the UK. Both sides would suffer economic losses and harm to their international reputations. Individuals and businesses in both the UK and EU could be subject to considerable uncertainty and legal confusion. It is a key national and European Union interest that such a situation is avoided.”

The conclusions are likely to embolden MPs – including a number of Tory rebels – who will insist on Monday that the government guarantee them a vote before any decision is made to leave the EU without a deal.

While amendments passed in the House of Lords are likely to be defeated, Tory MPs are determined to extract pledges from the government, even if they are not written into the Brexit bill.

Government whips are confident that the bill will gain royal assent by the middle of the week, allowing the prime minister to write to European Council president Donald Tusk to tell him that the UK is ready to begin formal divorce talks.

On Saturday night, in a sign that the government is keen to push ahead as soon as it can, the Brexit secretary, David Davis, issued a statement saying it was time to act on the will of the British people and leave the EU.

“However they voted in the referendum, the majority of people now want the prime minister to be able to get on with the job. By a majority of four to one, MPs passed straightforward legislation allowing the government to move ahead with no strings attached. I will be asking MPs to send the legislation back to the House of Lords in its original form so that we can start building a global Britain and a strong new partnership with the EU. Our new position in the world means we can restore national self-determination, build new trading links and become even more global in spirit and action.”

Labour’s Brexit spokesman, Keir Starmer, said he believed there was a high probability that May would trigger article 50 in the middle of this week. Referring to the select committee report he said: “It is a reminder of the stark choices we face over Brexit and the huge risks of the PM failing to get a good deal. Labour is clear that no deal is the worst possible deal and would not be in the national interest. The PM should be fighting for a close, collaborative future relationship with the EU and rule out the danger of reverting to WTO terms, as this would be disastrous for British jobs and businesses.”

But the debate continued to cause divisions in Labour as a group of around 30 Labour MPs, including a serving whip and a member of the shadow front bench, wrote an open letter criticising the leadership for failing to support a policy of staying in the EU single market.

The statement, drawn up by former shadow cabinet member Chuka Umunna and published on the Guardian website, says: “It is the basic responsibility of the Labour party to mount the strongest possible opposition to Theresa May’s government and fight for a Brexit deal that respects the will of the British people but ensures that they will not be made substantially worse off. As the party that has always stood up for working people, we must fight tooth and nail for a future that does not destroy their jobs and livelihoods. Single Market membership outside the EU is the way to achieve this and is what Labour should be arguing for.” The Labour leadership has argued for maximum access to the single market rather than full membership.

The select committee report states that in the event of “no deal”, British people living in European countries could be left with no rights to healthcare, work, or benefits. “The worst-case scenario for UK migrants in the EU would be that they would be treated differently in different EU countries, at any rate where they had resided in a country for fewer than five years.”

Deals for EU citizens living here could also become “chaotic”, said the committee. An unplanned Brexit would lead to “high levels of anxiety” for British people living elsewhere in the EU, and EU migrants in the UK.

A Government spokesperson said:

“We enter these negotiations aiming for a positive new partnership

with the EU, including a comprehensive agreement on free trade. We are

confident we can achieve such an outcome and that it is in the

interests of both sides.”

“However, as the Secretary of State for Exiting the European Union has

said, a responsibile government should prepare for all potential

outcomes.”

“He briefed the Cabinet last month on the need to prepare not just for

a negotiated settlement, but for the unlikely scenario in which no

mutually satisfactory agreement can be reached.”