The minister has said that the strategy is “to be better and compete” with the EU on all fronts.
The revelation comes as a string of chief executives from EU countries took part in a round table discussion in Downing Street today.
The meeting with Theresa May comes amid reports that industry in Germany is “beginning to panic” that the European Commission tactics will lead to Britain walking away from talks damaging their biggest export market for cars.
The minister told the Daily Express: “We have taken a polite approach and tried to be as reasonable as possible so far but in the end we have the means to compete and outdo the EU.
“After all we are the world’s fifth largest economy, speak the language of business, have great universities and the rest of it.
“We are in the perfect place to be at the beginning of the fourth industrial age and actually leaving the EU at the perfect time.”
The source added: “Some of us would have liked us to be more upfront about this before and shout louder about the fact we are ready to compete but we have taken a reasonable, diplomatic approach and there are good reasons for that.”
But the minister made it clear that the strategy is “we will do things better than the EU and compete with them.
“So for example if they do not let us join their agencies we are ready to set up our own but make them better and turn them into the international standard. That won’t be difficult.”
The minister made it clear that preparation for legislation and setting up the institutions needed for a no deal situation are advanced.
The threat of Britain taking the EU on in direct competition came after European Council president Donald Tusk had issued a rejection of Theresa May’s bold plan earlier this week.
He said: “EU27 wants UK as close friend and partner and will enter talks on future with open, positive mind.
“But given UK red lines only a free trade agreement (FTA) is possible.
“It will be the first FTA in history to loosen, not strengthen economic ties. Drifting apart is essence of Brexit.”
However, senior Tory MEP and leading Brexit campaigner David Campbell Bannerman said that Mr Tusk’s statement shows the EU is already beginning to shift towards Britain because of pressure coming from industry in the EU.
Mr Campbell Bannerman, who sits on the European Parliament’s trade committee, said: “The reports we are getting in the European Parliament is that German industry is beginning to panic that we may end up walking away and go for World Trade Organisation rules because of the hard stance being taken by leading figures in the EU like Tusk and [commission chief negotiator] Michel Barnier.
“What people didn’t realise about Tusk’s statement is that he has already conceded a Canada plus deal, in other words a deal better than the free trade agreement recently with Canada.
“That would solve the Northern Ireland border issue and give us complete tariff free access for goods, although limited access for services.
“I think we should bank that.”
But he added: “It is good that the Government is prepared for WTO rules and it sounds like the EU’s hard stand is pushing ministers that way.
“I would like ministers to come out more to say how prepared we are for that scenario.”