James Brokenshire has said there is still time to save power-sharing in Stormont.
Britain’s Northern Secretary said there are only a small number of differences between Sinn Féin and the DUP, mainly around Irish language rights and culture.
Mr Brokenshire warned that Northern Ireland will begin to run out of money in the coming weeks and said it is highly unlikely a new executive could be formed in time to pass a budget by the end of November.
In a statement to the House of Commons, the Secretary of State said he was making plans to impose a budget to protect public services over the next year.
It will not make any spending decisions, he said.
"The Government's strong desire would be for a restored executive in Northern Ireland to take forward its own budget," Mr Brokenshire said.
"So this step is one that I am now taking with the utmost reluctance and only in the absence of any other option."
He said: "Even now - however unlikely this may be - should the parties demonstrate that an executive could be formed in the immediate future I would clearly wish to proceed instead with legislation to allow that to happen."
Mr Brokenshire said a last-minute power-sharing deal would be conditional on a budget being agreed and passed by the end of November.
He also said he will also reflect carefully on MLAs' salaries - £49,500 a year - which cannot be stalled or docked without primary legislation in Westminster.
Mr Brokenshire made his statement after Taoiseach Leo Varadkar and British Prime Minister Theresa May spoke by phone and said it is still possible to revive power-sharing.
Both leaders said they did not want a return to Northern Ireland being run by direct rule in the way it was before the Good Friday Agreement.
The Northern Secretary said: "I still hope that the parties can resolve their differences and that an executive can be formed.
"We will continue to work with them and support them in their efforts."
Despite the deadlock, Mrs May is understood to remain committed to a £1 billion investment in Northern Ireland agreed as part of a voting pact between the Conservatives and the DUP at Westminster.
Mrs May's official spokesman said she and the Taoiseach had agreed in their phone conversation on the need for a "shared endeavour to see the restoration of devolved government" in Northern Ireland.
"They talked about the responsibility on parties to overcome their differences and the need for them to compromise on the outstanding issues for the benefit of all communities in Northern Ireland," said the spokesman.
Mrs May believes it is "not in anybody's interests" for there to be a return to direct rule, he added.