David Cameron has come under increasing pressure to rein in Eurosceptic members of his party after it emerged that frustrated European Union officials have begun drawing up a plan to pass a crucial seven-year budget without the UK.
The Prime Minister will travel to Brussels on Thursday for crucial talks on the budget. Mr Cameron has faced calls from Tory rebels, and from the Labour Party, to secure a freeze in spending in the talks. A spokesman said he had been in contact with Angela Merkel and François Hollande over the weekend to try to reach a deal but EU diplomats have expressed doubts that British demands can be accommodated, and have reportedly begun studying the possibility of passing the budget without the UK's agreement.
Europhiles want the Prime Minister to rein in cabinet ministers, including Michael Gove and Iain Duncan Smith, who have suggested that Britain could enjoy a bright economic future outside the EU.
British officials were quick to dismiss the threat as a non-runner, since the budget must be approved unanimously, giving Mr Cameron a veto. But the plans reflect the increasingly fragile nature of Britain's relationship with the other 26 members.
Speaking ahead of the budget talks, Mr Cameron said Brussels had to stop "picking the pockets" of the public. "I think I have got the people of Europe on my side in arguing that we should stop spending more and more money through the EU budget," he told the CBI's annual conference in London.
Business leaders and pro-European politicians have warned that growing speculation over whether Britain will leave the EU is undermining the UK's negotiating clout.
Sir Roger Carr, the president of the CBI, said: "If we are to avoid an exit vote in any referendum, it is essential that the voice of British business is loud and clear in extolling the virtues of future engagement, not as a reluctant participant, but as the lynchpin of our wider global trade ambitions."