LONDON (Reuters) - It would be a serious dereliction of duty if the British government failed to plan for the possibility of not reaching an exit deal with the European Union, a committee of lawmakers said in a report published on Sunday.
Prime Minister Theresa May, who will trigger the formal divorce process by the end of this month, has said she would be prepared to walk away from negotiations without an agreement because "no deal is better than a bad deal".
Article 50 of the EU's Lisbon Treaty allows for a period of up to two years of divorce talks.
Parliament's Foreign Affairs committee warned that a breakdown in negotiations would be a "very destructive outcome", causing economic harm to both sides as well as creating uncertainty and legal confusion for individuals and businesses.
"There is a real prospect that negotiations will fail," committee chairman Crispin Blunt, a lawmaker in May's ruling Conservatives, said in a statement.
"The government should therefore require each department to produce a 'no deal' plan identifying the likely consequences and making proposals, including guidance to individuals and businesses, to mitigate potential risks. Anything less would be a dereliction of duty."
Issues such as the sudden return of a customs border between Northern Ireland and the Republic of Ireland, a gap in regulations and confusion about the future of UK citizens in the EU and vice versa were among the consequences of a 'no deal' situation highlighted by the committee.
The committee, which previously criticised the government's failure to plan for Britons voting to leave the EU at last year's referendum, said making such preparations would also add credibility to the government's position that it is prepared to walk away from a bad deal.
Reporting by Kylie MacLellan; Editing by Toby Davis