The next prime minister will have to reckon with a reinvigorated “Gaukward squad”, including David Gauke and Philip Hammond, who are determined to block a no-deal Brexit if they are dispatched to the backbenches, senior Tories warn.

The Conservative leadership race has been dominated by Brexit, with Boris Johnson and Jeremy Hunt both insisting they would be willing to contemplate leaving without a deal if they could not secure concessions from Brussels over the summer.

Hammond, who has made a series of increasingly forthright interventions in recent days, dropped a heavy hint on Tuesday that he would be prepared to vote against a no-deal Brexit, even if it meant breaking the party whip. The chancellor has not ruled out serving in a Johnson government, but the frontrunner is widely expected to sack him, as is his rival Hunt.

Hammond answered Treasury questions from MPs in the House of Commons in what may have been his final outing at the dispatch box on Tuesday and pointed to forecasts suggesting no deal would blow a £90bn hole in public finances over the next 15 years.

His Labour shadow, John McDonnell, asked: “Will he join us in committing himself to doing everything he possibly can to oppose the prorogation of parliament to try to sneak a no deal through, and also voting against a no deal?”

Q&A What does a no-deal or WTO-rules Brexit mean? Show Hide If the UK leaves the EU without a deal it would by default, become a “third country”, with no overarching post-Brexit plan in place and no transition period. The UK would no longer be paying into the EU budget, nor would it hand over the £39bn divorce payment. The UK would drop out of countless arrangements, pacts and treaties, covering everything from tariffs to the movement of people, foodstuffs, other goods and data, to numerous specific deals on things such as aviation, and policing and security. Without an overall withdrawal agreement each element would need to be agreed. In the immediate aftermath, without a deal the UK would trade with the EU on the default terms of the World Trade Organization (WTO), including tariffs on agricultural goods. The UK government has already indicated that it will set low or no tariffs on goods coming into the country. This would lower the price of imports – making it harder for British manufacturers to compete with foreign goods. If the UK sets the tariffs to zero on goods coming in from the EU, under WTO “most favoured nation” rules it must also offer the same zero tariffs to other countries.

WTO rules only cover goods – they do not apply to financial services, a significant part of the UK’s economy. Trading under WTO rules will also require border checks, which could cause delays at ports, and a severe challenge to the peace process in Ireland without alternative arrangements in place to avoid a hard border.

Some no-deal supporters have claimed that the UK can use article XXIV of the General Agreement on Tariffs and Trade (Gatt) to force the EU to accept a period of up to 10 years where there are no tariffs while a free trade agreement is negotiated. However, the UK cannot invoke article XXIV unilaterally – the EU would have to agree to it. In previous cases where the article has been used, the two sides had a deal in place, and it has never been used to replicate something of the scale and complexity of the EU and the UK’s trading relationship. The director general of the WTO, Roberto Azevêdo, has told Prospect magazine that “in simple factual terms in this scenario, you could expect to see the application of tariffs between the UK and EU where currently there are none”. Until some agreements are in place, a no-deal scenario will place extra overheads on UK businesses – eg the current government advice is that all drivers, including lorries and commercial vehicles, will require extra documentation to be able to drive in Europeif there is no deal. Those arguing for a “managed” no deal envisage that a range of smaller, sector-by-sector, bilateral agreements could be quickly put into place as mutual self-interest between the UK and EU to avoid introducing or to rapidly remove this kind of bureaucracy. Martin Belam

Hammond replied that he had been “consistently clear that I believe a no-deal exit will be bad for the UK, bad for the British economy, bad for the British people.”

The chancellor added: “We cannot, however, rule out that that could happen, because it is not entirely in our hands. But I do agree with him that it would be wrong for the British government to seek to pursue no deal as a policy and I believe that it will be for the House of Commons, of which I will continue proudly to be a member, to ensure that that doesn’t happen.”

One senior Tory said: “Hammond is clearly the most powerful person in government at the moment; he’s using the short time he has left and he’s putting structures in place in terms of what happens next.”

If Johnson wins, Hammond is likely to be joined on the backbenches by David Gauke, currently justice secretary, and Rory Stewart, the international development secretary and former leadership contender, both of whom have ruled out serving under the frontrunner. The business secretary, Greg Clark, is also widely believed to be unlikely to remain in post.

All are resolute opponents of a no-deal Brexit, and they would join a group of former ministers including Steve Brine,, who is involved in Hunt’s campaign, and Richard Harrington who have resigned in recent months because of their opposition to no deal.

Profile Boris Johnson's Tory leadership campaign Show Hide Personal style A late-night altercation between Tory leadership favourite, Boris Johnson, and his partner, Carrie Symonds initially changed the dynamics of Johnson's campaign. He had been either invisible or deliberately sober to the point of dullness, when his usual primary draw to Tory members is a self-created sense of optimism and fun. Much is also made of his supposed broad appeal to the electorate, evidenced by two terms as London mayor. His bizarre claim to make model cardboard buses has raised eyebrows. In most political contests, Johnson’s character – he has lost more than one job for lying, and has a complex and opaque personal life – would be a big issue, but among the Tory faithful he seemingly receives a free pass. It remains to be seen what impact that late-night police visit will have on his chances. Brexit He has promised to push for a new deal while insisting the UK will leave the EU come what may on 31 October, even if it involves no deal. While his hard Brexit supporters are adamant this is a cast-iron guarantee of leaving on that date, elsewhere Johnson has been somewhat less definitive. Asked about the date in a BBC TV debate, Johnson said only that it was 'eminently feasible', although he then went on to tell TalkRadio that the 31 October deadline was 'do or die'. Taxation His main pledge has been to raise the threshold for the 40% higher tax rate from £50,000 to £80,000, at a cost of almost £10bn a year, which would help about 3 million higher earners, a demographic with a fairly sizeable crossover into Tory members. Johnson’s camp insist it would be part of a wider – and so far unknown – package of tax changes. Public spending He has said relatively little, beyond promising a fairly small increase in schools funding, as well as talking about the need to roll out fast broadband across the country. Johnson has generally hinted he would loosen the purse strings, but given his prior fondness for big-ticket projects – London’s cancelled garden bridge, the mooted 'Boris island' airport – perhaps expect more of a focus on infrastructure projects than services. Climate and environment This is unlikely to be a big issue for Conservative party members, and Johnson has not said much on this beyond confirming his general support for the new government target of cutting greenhouse gas emissions to a net zero by 2050. Foreign policy Also unlikely to be a big issue among Tory members, beyond vague platitudes on 'global Britain', it could be a weak spot for Johnson given his poor performance as foreign secretary. He was seen as something of a joke by diplomats – both UK and foreign – and is likely to face more questioning over his gaffe about the jailed British-Iranian woman Nazanin Zaghari-Ratcliffe Peter Walker Political correspondent Photograph: Isabel Infantes/AFP

“There will clearly be more credible leadership on the backbenches against no deal,” said one Conservative MP. “A lot of effort is going into this.”

Some of this group had a residual loyalty to May, despite their despair at the bungling of Brexit, but many MPs say they are unlikely to feel similarly bound to fall in behind Johnson.

May conducted a brutal reshuffle when she arrived in Downing Street, sacking George Osborne and Nicky Morgan among others, both of whom went on to criticise her approach.

Johnson could decide to be more emollient, rather than create a cabal of opponents on the backbenches, but he may also want to reward key members of his campaign team such as Grant Shapps and Kit Malthouse with seats at the cabinet table.

Amber Rudd, another potential rebel, has told friends she would be willing to serve in a Johnson cabinet. The work and pensions secretary believes she could continue to influence Brexit policy during a crucial period.

A fresh move against no deal could come before MPs break up for their summer recess at the end of July, but Conservative backbenchers say it is more likely to come during a narrow window of opportunity in September or October.

Tory MPs including Dominic Grieve and Oliver Letwin are liaising with senior ministers, colleagues and Labour frontbenchers over the best tactics.

Labour has not ruled out tabling a motion of no confidence as soon as the new prime minister takes office on 24 July, but cross-party efforts are currently focused on plans that would fall short of this nuclear option, such as seeking to amend any government legislation tabled in the autumn.

Some opponents of no deal are more pessimistic. The former Conservative MP Nick Boles, now an independent, told the Institute for Government on Tuesday he believed it was “more likely than not” that Britain would leave without a deal on 31 October.

Figures show the UK economy has stalled since the spring as the prospect of no deal has grown. Last month construction industry output “dropped like a stone” to give its worst performance in more than 10 years, and the manufacturing industry recorded the sharpest drop in factory output for more than six years.

Profile Jeremy Hunt's Tory leadership campaign Show Hide Personal style His style is notably technocratic, with few rhetorical flourishes and an emphasis on his consensual approach and long record as a minister, notably during more than five years as health secretary, a traditional graveyard of ministerial careers. Hunt’s attempts to talk up a backstory as an 'underestimated' entrepreneur can fall flat given he is also the son of an admiral and was head boy at Charterhouse. Overall, Hunt’s approach can seem uninspiring and hard to pin down in terms of core beliefs, hence the 'Theresa in trousers' nickname among some Tory MPs. Hunt has made headlines by promising to repeal the ban on fox hunting, while always facing scrutiny on his views on the availability of abortion. His campaign team have decided to take the fight directly to rival Boris Johnson though, with Hunt taking part in a Twitter Q&A session as a direct response to Johnson's refusal to appear on a Sky TV head-to-head debate. The hashtag: #BoJoNoShow. Brexit He says a new deal with the EU is possible by 31 October and he would send a cross-party negotiating team to Brussels, including members of the DUP. He would countenance leaving the EU without a deal but is notably more wary than rival Boris Johnson. Taxation Has been fairly silent on this, beyond a proposal to cut corporation tax from 19% to 12.5%, which according to the IFS would cost an estimated £13bn a year. Even at 19%, the UK rate is well below European and global averages. Public spending Before the campaign began he called for a doubling of defence spending, but he has since pulled back slightly, saying only that it should increase. He has argued that cuts to social care budgets had gone too far. Climate and environment Hunt backs the 2050 target for zero net carbon emissions and has called for 'sensible tax incentives' to encourage green initiatives, but very little beyond this. Foreign policy A likely strength for him, as he has been seen as a solid foreign secretary, an impression burnished by taking over from the chaotic Johnson. This has been a key part of his pitch. Peter Walker Political correspondent Photograph: Luke Dray/Getty Images Europe

The Bank of England governor, Mark Carney, said a broad range of economic indicators “point to no growth in UK output” and the situation would worsen if the eventual outcome was no deal.

Speaking in Bournemouth to the Local Government Association annual conference, Carney said global markets had become deeply worried by the impact of Brexit and Donald Trump’s threats of more and higher trade tariffs against China, the EU and India.

He said the prospect of higher tariffs, possibly lasting for many years, had forced global investors to seek safe havens for their funds, restricting the money available for investment.

“Over the past year the global economy has shifted from a robust, broad-based expansion to a widespread slowdown, with the proportion of the global economy growing above trend falling from four-fifths to one-sixth,” he said.

Separately, the credit ratings agency Moody’s said Britain’s ability to borrow cheaply on international money markets would be damaged by a no-deal Brexit.

Moody’s stripped the UK of its AAA rating after the 2008 financial crisis and it said on Tuesday that its current AA2 status could be in jeopardy.