"Throughout the process the government has said it's only prudent for us to prepare for no deal. We don't believe that that's either in the U.K.'s interest or the interest of the European Union," Fox said on Friday.
He warned that a no-deal scenario would most likely result in "undue friction" for companies based in the U.K. and the EU post-Brexit, with the process also resulting in "threats to their profitability."
"Now, it could happen (and) it would be unfortunate if it did," Fox said.
The government unveiled its long-awaited draft withdrawal agreement on Wednesday, which details the terms of the U.K.'s departure from the EU on March 29, 2019.
A no-deal scenario is generally considered to be where the U.K. crashes out of the EU without any formal relationship and has to rely on WTO trading rules.