The Department for Exiting the European Union said: "There is little evidence that businesses are preparing in earnest for a no-deal scenario." To support that assertion, the department said only 40,000 of the 240,000 firms that trade with the EU and would need a registration number to keep doing so in the event of a no-deal scenario had registered as of Tuesday.
On the government's own preparations, the department says almost one-third of the "most critical projects" are not on track to be completed by the scheduled departure day, March 29. It says short-term economic effects of a no-deal Brexit include a very significant reduction in goods flowing across the English Channel and "reduced availability and choice" of food items.
Prime Minister Theresa May said Tuesday that if lawmakers haven't approved a withdrawal deal by March 12, Parliament will get to vote on whether to leave without one or try to postpone the day Brexit takes effect.
British Prime Minister Theresa May has bowed to political pressure and says that if Parliament rejects her Brexit deal, lawmakers will then get to decide whether to leave the EU without an agreement or seek to delay the country's departure from the bloc.
May says that if Parliament rejects her deal with the EU next month, lawmakers will then vote on whether to leave the bloc without an agreement. If that is defeated, as seems likely, they will vote on whether to ask the EU to postpone Britain's departure.
Britain is due to leave the EU on March 29, but so far the government has not been able to win Parliament's backing for its divorce deal with the bloc.
That leaves the U.K. facing a chaotic "no-deal" Brexit that could cause disruption for businesses and people in both Britain and the EU.
Bank of England Governor Mark Carney has warned that the Brexit uncertainty that has dogged the British economy over the past couple of years will remain even if lawmakers agree to a withdrawal agreement with the European Union in coming weeks.
Addressing lawmakers Tuesday, Carney said it's a "reasonable possibility" that uncertainty will persist as businesses and households will still be unsure about what the future relationship between the U.K. and the EU will be.
Uncertainty, he said, "will persist beyond the Brexit date."
Britain is due to leave the EU on March 29. A withdrawal agreement will in theory see a transition period kick in whereby Britain follows EU rules for a period until the future relationship is agreed upon.
Brexit uncertainty has increasingly weighed on the British economy in recent months, with business investment taking a particularly big hit. In 2018, business investment slumped by 3.7 percent.
Bank of England rate-setters appear to be split on which way interest rates will go if Britain crashes out of the European Union next month without a deal on future relations.
Addressing lawmakers, Deputy Governor Dave Ramsden voiced worries about the impact on inflation if Britain leaves on March 29 with no deal and no transition to a new future relationship with the EU.
That scenario would lead to tariffs slapped on a large chunk of trade between the U.K. and the EU and a likely fall in the pound, which would raise the cost of imports.
Gertjan Vlieghe, one of the bank's rate-setters, said he thinks rates are more likely to go down or stay unchanged given the likely "hit to confidence."
Bank Governor Mark Carney said the bank "will provide all the stimulus we can subject to delivering price stability. ... We'll do what we can but we shouldn't over-sell what we can do."
The bank's main interest rate stands at 0.75 percent.
The Bank of England is ready to pump more liquidity into the U.K. financial system as it prepares for the country's scheduled exit from the European Union on March 29.
In a statement, the bank said it will hold liquidity auctions on a weekly basis, rather than monthly, from March through to the end of April. It did that also around the time of the Brexit referendum in 2016.
Bank Governor Mark Carney told lawmakers Tuesday that the move was "prudent and precautionary." He insisted that there is "no signal" in the move, and that it is part of "normal contingency planning."
The bank, he said, has not seen any liquidity stresses in the markets, adding that the system is "very liquid."
One worry in financial markets is that liquidity could dry up in the event the country crashes out of the EU with no deal.
The pound has spiked to a month-high against the dollar after Britain's main opposition party said it was ready to back a second referendum on the country's exit from the European Union.
On Monday, the Labour Party said it would back calls for another vote if its Brexit proposals fail to win the support of lawmakers.
Traders are also hopeful that lawmakers will back proposals that will effectively force Prime Minister Theresa May to seek an extension to the current Brexit date of March 29 if Parliament fails to agree a withdrawal agreement in time.
In midmorning London trade, the pound was up 0.7 percent at $1.3180.
Lukman Otunuga, Research Analyst at FXTM, said that with just over one month left until Britain is scheduled to leave the EU, the pound will likely "display extreme levels of sensitivity and volatility to Brexit headlines."
Germany's main business lobby group is urging British politicians to stop dithering on Brexit and says it would be "absurd" for Britain to slide into a no-deal departure from the European Union that isn't even supported by a majority in its Parliament.
Joachim Lang, the chief executive of the Federation of German Industries, said Tuesday that "British politicians must not delay decisions any longer." He added that "if the British government doesn't find a majority in the lower house in March, it is time to halt the withdrawal process."
Lang said an unregulated Brexit would hurt the German economy but called on the German government and European Union to stick to their principles. He said that "the top priority must continue to be the unity of the EU 27 and the European Economic Area. The fundamental principles and achievements of European integration are too valuable to call into question."
Prime Minister Theresa May is facing a revolt from members of her own government as lawmakers try to prevent her from taking Britain out of the European Union in a month's time without a divorce deal.
Three junior government ministers write in Tuesday's Daily Mail that they will vote with lawmakers from all parties to stop a no-deal departure unless May agrees to delay Brexit and guarantee "we are not swept over the precipice on March 29."
May has insisted Britain will leave the EU on schedule, even though she still hasn't reached an agreement that can win parliamentary approval.
The main opposition Labour Party on Monday took a step to back calls for a referendum on the Brexit deal as a way to break the deadlock.