It comes amid speculation that Theresa May failed to get French President Emmanuel Macron to agree to her controversial Chequers plan at a hastily arranged summit on Friday.
Dr Fox said that a no deal – otherwise known as a World Trade deal – is now a 60/40 outcome because of intransigence in Brussels backed up by the French government.
But the outcome has been welcomed by many Brexiteers with evidence showing that EU countries will lose £500 billion as a result of failing to strike a trade deal including the £39 billion divorce bill.
Meanwhile, Britain will gain more than £600 billion as a Brexit dividend by being free of Brussels rule on WTO international rules.
Last night the research by Economists for Free Trade was hailed by senior Tory MP Jacob Rees-Mogg, chairman of the influential European Research Group of more than 60 pro-Brexit MPs.
He said: “Trading with the EU on WTO terms would work well for the UK and allows us to achieve Brexit sooner.
“It would save the country £39 billion which the EU desperately needs to balance its budget.
“So with no deal the EU would be the loser.”
Dr Fox used a Sunday Times interview to give his assessment of the negotiations.
“I think the intransigence of the EU Commission is pushing us towards no deal,” he said.
“We have set out the basis in which a deal can happen but if the EU decides that the theological obsession of the unelected is to take priority over the economic wellbeing of the people of Europe then it’s a bureaucrats’ Brexit – not a people’s Brexit – then there is only going to be one outcome.”
He said EU chief negotiator Michel Barnier had dismissed the UK’s proposals in the Chequers plan thrashed out by Theresa May and the Cabinet simply because “we have never done it before”.
The Government has admitted its proposals are unprecedented, but Dr Fox said Mr Barnier’s response “makes the chance of no deal greater”.
The Prime Minister held talks with French President Macron on Friday, cutting short her holiday to visit his summer retreat.
And ministers including Foreign Secretary Jeremy Hunt and Brexit Secretary Dominic Raab have also engaged in diplomatic activity in Europe in recent days as the Government seeks to deal directly with individual governments in an effort to keep the Chequers plan alive.
The organisation also revealed how countries on WTO terms do three times better in trade that member states of the EU locked in Brussels red tape.
Another paper by Professor Minford, an advisor to Margaret Thatcher, and economist Yongdeng Xu shows that “a breakdown of talks would be positive for the UK to the tune of a one-off gain of £38 billion on the EU budget, plus £180 billion from bringing forward the non-budgetary Brexit gains, plus £433 billion from EU tariff revenue, some £651 billion in all.”
They also note: “For the EU it would mean a one-off loss of £38 billion in financial settlement, plus another one-off loss of £36 billion in terms of trade gain, plus the £433 billion from paying the UK its tariff revenue.”
Some of the hardest hit parts of the EU would be Ireland with a four per cent loss in GDP, where ironically the Government has played a major role in forcing a no deal by making impossible demands on the Northern Ireland border.
Ireland is also likely to lose its beef market when Britain can get cheaper deals from countries like Argentina outside the EU.
The Murcia region of Spain could lose 75 per cent of its exports; France will put at risk a £4 billion trade surplus with Britain; 42,000 jobs in the Belgium region of Flanders are dependent on Britain; £61 billion of German trade is at risk if it loses the British market.
In a sign that member states are being warned of the consequences of the failure to find a deal, Dr Fox said: “It’s up to the EU27 to determine whether they want the EU Commission’s ideological purity to be maintained at the expense of their real economies.”
Meanwhile, former cabinet minister Priti Patel said Mrs May must ditch the Chequers plan, which would see a “common rulebook” for goods with the EU – effectively tying the UK to terms set by Brussels.
Writing over the weekend she said it did not meet the result of the referendum and “will leave us half-in and half-out, still bound to EU regulations and constraints”.
Previously, the Daily Express has published evidence from leading economists which shows that the best deal for the UK could be a World Trade Deal with no trade deal with the EU.
The UK gets to keep its £39 billion divorce bill and deregulation and controlling immigration could boost Treasury coffers by £80 billion a year, according to Economists for Free Trade led by Professor Patrick Minford.