Boris Johnson has said it looked “very likely” a post-Brexit trade deal would fail to be agreed unless the European Union position changed “substantially”.
His pessimistic tone was expressed during last-ditch talks with European Commission president Ursula von der Leyen, with a Downing Street spokeswoman saying negotiations were now in a “serious situation”.
By contrast, von der Leyen said there has been “substantial progress” in talks over a deal following a call between the two.
Yet while the Brussels chief sounded a note of optimism on many issues in post-Brexit negotiations, she added “big differences remain” and “bridging them will be very challenging”.
Negotiations between the UK and EU will continue on Friday, but time is running out to reach a deal with just a fortnight until the end of the transition period.
In the first statement published on Thursday night, von der Leyen said: “This evening I took stock with UK prime minister Boris Johnson of the on-going negotiations for a comprehensive Partnership Agreement between the European Union and the United Kingdom.
“We welcomed substantial progress on many issues. However, big differences remain to be bridged, in particular on fisheries. Bridging them will be very challenging.
“Negotiations will continue tomorrow.”
But a Downing Street spokeswoman later said: “The prime minister spoke to Commission president Ursula von der Leyen this evening about the state of play in the UK-EU negotiations.
“The prime minister underlined that the negotiations were now in a serious situation. Time was very short and it now looked very likely that agreement would not be reached unless the EU position changed substantially.
“He said that we were making every effort to accommodate reasonable EU requests on the level playing field, but even though the gap had narrowed some fundamental areas remained difficult.
“On fisheries he stressed that the UK could not accept a situation where it was the only sovereign country in the world not to be able to control access to its own waters for an extended period and to be faced with fisheries quotas which hugely disadvantaged its own industry. The EU’s position in this area was simply not reasonable and if there was to be an agreement it needed to shift significantly.
“The prime minister repeated that little time was left. He said that, if no agreement could be reached, the UK and the EU would part as friends, with the UK trading with the EU on Australian-style terms.
“The leaders agreed to remain in close contact.”
The UK’s chief negotiator Lord Frost meanwhile warned that progress in the talks “seems blocked”, tweeting: “The situation in our talks with the EU is very serious tonight. Progress seems blocked and time is running out.”
Lord Frost and his EU counterpart Michel Barnier have been holding discussions in Brussels all week aimed at breaking the deadlock on key issues which have plagued the talks for months.
They include fishing rights, the “level playing field” to ensure neither side can unfairly compete with the other on environmental standards, workers’ rights or state subsidies, and the legal mechanisms to govern any deal.
Cabinet Office minister Michael Gove, who has been in charge of the Government’s no-deal planning, said earlier on Thursday that the chances of an agreement remained “less than 50%”.
He told the Commons Brexit Committee the “most likely outcome” was that the current transition period would end on December 31 without a deal.
“I think, regrettably, the chances are more likely that we won’t secure an agreement. So at the moment less than 50%,” Gove said.
He also said the government will not seek to negotiate a fresh trade agreement with the EU next year if they cannot reach a deal before the end of the Brexit transition period.