Brexit Secretary Stephen Barclay told EU negotiator Michel Barnier Britain did not have to re-open the divorce deal in a major concession, it was claimed today.
The climbdown will enrage Brexiteers who says the only chance of the deal passing in time for exit day is with the Irish border backstop being re-written.
During talks this week, Mr Barclay is said to have endorsed legal guarantees on the current wording - far short of what scores of Tory MPs have demanded.
Sources in the Brexiteer European Research Group told MailOnline it wanted 'real changes not just changed words' while its leader Jacob Rees-Mogg warned: 'I doubt legal verbiage without a change to the text will impress anyone.'
In a warning shot to the Prime Minister, MPs in the hardline ERG last night refused to endorse her negotiating strategy, consigning her to another humiliating defeat in the Commons.
Mrs May was also abandoned by Remain rebels demanding no deal is taken off the table as she collapsed to a 303 to 258 vote defeat.
The anti no deal MPs were boosted in the aftermath of the vote as Foreign Office Minister Alistair Burt said Britain would not leave with no deal in March.
Commons leader Andrea Leadsom insisted today last night's defeat was only a 'hiccup' for the PM and said she would continue to seek 'legally binding changes to the backstop' - with Mrs May to travel again to Brussels 'within days'.
In a warning shot to the Prime Minister (pictured leaving Parliament last night), MPs in the hardline European Research Group refused to endorse her negotiating strategy, consigning her to another humiliating defeat in the Commons
Commons leader Andrea Leadsom (pictured leaving Parliament last night) insisted today last night's defeat was only a 'hiccup' for the PM and said she would continue to seek 'legally binding changes to the backstop'
Brexit Secretary Stephen Barclay (pictured in the Commons yesterday) told EU negotiator Michel Barnier Britain did not have to re-open the divorce deal in a major concession, it was claimed today
Mrs Leadsom told the Today programme that no was 'absolutely' still on the table.
She said: 'The prime minister carries on.
'She will continue to seek those legally binding changes to the backstop that will enable Parliament to support our deal.'
She added: 'The vote yesterday did not change anything.'
Despite Mrs Leadsom's claims, a source involved in the talks on the Irish backstop between Mr Barclay and Mr Barnier this week told
The Times, the Brexit secretary said the British focus was on the 'outcome'.
He told Mr Barnier as long as the commitments were legally binding 'it will meet needs'.
Mr Barnier was told the exact nature of the legal guarantees were a 'question for the attorney-general' and that there was plenty of room for 'creativity about how it can be done'.
As tensions mount today, Mr Burt said: 'We won't. We are not leaving without a deal. If you want to leave, you'd better agree one. In the next fortnight would help.'
He added: 'There is a majority in the House to reject no deal. Let's Leave, with the Agreement, and the chance of a new relationship with the EU.
'Honours both Leavers and those who voted to Remain. Let's all make the compromise.'
But Mr Baker, the ERG's deputy chairman, told Today he was 'standing up for what the majority of the people voted for', while still 'making enormous compromises'.
And despite the government defeat, he argued: 'It's still very clear that there is a majority in the House of Commons for a deal which replaces the backstop with alternative arrangements. The European Union should understand that.
'But they should also understand that there are those of us unwilling to vote to take a no-deal off the table.'
As tensions mount today, Mr Burt said: 'We won't. We are not leaving without a deal. If you want to leave, you'd better agree one. In the next fortnight would help.'
In total 66 Tories went missing for last night's showdown, while five actively opposed her.
Summing up the pincer movement Mrs May found herself caught in, both arch-Brexiteer Boris Johnson and his pro-EU brother Jo abstained.
Mrs May did not even bother to enter the chamber to hear the grim result, with Jeremy Corbyn demanding to know where she was and taunting that she 'can't keep running the clock down'.
The blow came despite Brexit Secretary Steve Barclay desperately trying to reassure mutinous MPs that no deal is not being taken off the table - and warning that Brussels will conclude the UK's 'resolve is weakening'.
But his tough words only served further to infuriate Remainers.
The defeat has no binding effect on the government, but plunges her deeper into chaos and could persuade the EU there is no point offering any more concessions on the Irish border backstop.
The PM's spat with Brexiteers centred on a Remainer-backed amendment that was passed by MPs two weeks ago rejecting the idea of no deal.
An amendment put forward by former Cabinet minister Caroline Spelman said the UK should not 'leave the European Union without a Withdrawal Agreement and a Framework for the Future Relationship'.
It was narrowly approved by 318 votes to 310 despite the government whipping against.
Although that vote was not binding on ministers, the government motion due to be considered tonight endorses 'the approach to leaving the EU expressed by this House on 29 January'.
That was apparently intended as a reference to the Brady amendment, which called for the Irish backstop to be replaced with 'alternative arrangements' and was passed with Mrs May's blessing.
However, it was interpreted by Brexiteers as Mrs May admitting that no deal is off the agenda - despite her repeatedly insisting it is still a possibility.
During the debate, Tory MP Bill Cash said branded the Government motion 'doublethink' and said it 'further undermines public trust'.
He said: 'We're now truly entering the world of George Orwell's Ministry of Truth.
'In his book 1984 Orwell said doublethink means the power of holding two contradictory beliefs in one's mind simultaneously and expecting both of them.
'This double motion is doublethink in action and I cannot possibly vote for it.'
But former chancellor Ken Clarke launched a scathing attack on the ERG.
He said: 'The Government has pursued one of the factions on our side of the House, we have a kind of breakaway party within a party, a bit like Momentum really, they've got their leader, they've got their chief whip.
'They are ardent right-wingers, and the Government has set off in pursuit of these bizarre negotiating tactics that some of them say, though some of them seem to want to leave with no deal, because any agreement with foreigners from the continent is a threat to our sovereignty.'
He warned that is 'the wrong group to pursue', and called the Brady amendment 'meaningless'.
But after Mr Barclay entreated Eurosceptics to fall in line, Remainer former Cabinet minister Oliver Letwin said he now believed Mrs May would go for no deal.
'When the chips are down, (she) will actually prefer to do what some of my esteemed colleagues prefer, and to head for the exit door without a deal, which the secretary of state informed us is the policy of Her Majesty's government in the event that her deal has not succeeded. That is terrifying fact,' he told the House.
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