The Irish taoiseach joined Scottish First Minister Nicola Sturgeon and Welsh First Minister Carwyn Jones for a Brexit summit in the Channel Islands today.
Representatives from Prime Minister Theresa May’s cabinet were also present at the British-Irish Council (BIC) to hear Mr Varadkar’s Brexit warning.
He said: “We have made some good progress to date and I think it will be possible to come to a withdrawal agreement that works for everyone.
“But we also need to be prepared for the possibility that that will not happen.
“All EU countries will be stepping up preparations for all possible scenarios, including a no-deal Brexit.”
The BIC brings together representatives of the Irish and British governments, the devolved administrations in Northern Ireland, Scotland and Wales and the Isle of Man, Guernsey and Jersey crown dependencies.
Today’s summit met without any representative from Northern Ireland due to the ongoing political stalemate following the assembly collapse in January 2017.
Before today’s BIC summit, Ms Sturgeon and Mr Jones issued a joint statement calling on Mrs May to think again about pulling the UK out of the single market and customs union.
The pair said quitting was not in the national interest and urged Mrs May to secure a Norway-style solution in the EU exit talks.
They said: “In practice, the Prime Minister’s position on issues such as customs arrangements and regulatory alignment appears increasingly difficult to reconcile with the red lines, but she cannot come clean because she is held hostage by the Brexiteers in her Cabinet and party. This cannot continue.
“We call on the UK Government in its forthcoming white paper to commit to staying inside the single market and customs union recognising that this will require continued alignment with the EU regulatory environment.
“The aim should be a ‘Norway plus’ model on the basis that the red lines set out by the Prime Minister in her Lancaster House speech in January 2017 are not consistent with the national interest.”
The council will later discuss the current political situation in Northern Ireland and Mr Varadkar is expected to reiterate his regret that Northern Ireland has no representation because the Executive has still not been restored.
A UK Government spokesman said: “When we leave the EU the whole of the UK – including Wales and Scotland – will be leaving the customs union and single market. There is no change to that position.
“Leaving the customs union means for the first time in 40 years, the UK will have the freedom to strike our own trade deals.
“Our focus is on getting the best deal possible for the UK – one that allows us to take back control of our borders, laws and money.”