Several backbenchers, who disagree with the Labour leadership over its handling of Brexit and the anti-Semitism row, are expected to break away.
But Labour MP Stephen Kinnock, a vocal critic of leader Jeremy Corbyn, has urged them to “stay in and fight”.
Shadow chancellor John McDonnell said on Sunday he did not see “any need for anybody to split from the party”.
Mr McDonnell insisted the party was “holding together on Brexit” and would be “ruthless” on claims of anti-Semitism that have plagued Labour.
He said the effect of MPs splintering from the party would be similar to the SDP breakaway in 1981, which split Labour’s vote and “installed Mrs Thatcher in power for a decade”.