The European Union has published a "no deal" back-up plan as the UK's foreign minister, Dominic Raab, says the bloc needs to move its stance on both fisheries and a level playing field by Sunday to break the impasse.
Ursula von der Leyen, president of the European Commission, has laid out contingency plans to protect road and air travel along with fishing rights if Britain leaves the union without a trade deal.
"Negotiations are still ongoing. However, given that the end of the transition is very near, there is no guarantee that if and when an agreement is found, it can enter into force on time," she said.
"Our responsibility is to be prepared for all eventualities, including not having a deal in place with the UK on January 1, 2021. That is why we are coming forward with these measures today [Thursday]."
UK Prime Minister Boris Johnson and Von der Leyen have given themselves until the end of the weekend to seal a new trade pact after failing to overcome remaining hurdles over a "lively" dinner on Wednesday.
"There's still clearly some scope to keep talking but there are significant points of difference that remain," Raab told the BBC on Thursday.
"You never say never in these talks, but I think we do need to get some finality," he added, when asked whether Sunday was a firm deadline.
The pound has extended its losses against the dollar and the euro, down 0.6 percent against the dollar at 8:29 a.m. GMT. Versus the euro, it was down around 0.7 percent.
Raab said the main points of contention – fisheries and commitments on a so-called level playing field – were narrow in scope but they were matters of principle for the UK.
"Substantial movement" was needed on both issues for talks to continue beyond Sunday, he said.
The UK formally left the EU in January, but has since been in a transition period, during which it remains in the EU single market and customs union, meaning that rules on trade, travel and business have stayed the same.
That ends on December 31 and if by then there is no agreement to protect around $1 trillion in annual trade from tariffs and quotas, businesses on both sides will suffer as the UK moves to trade with the EU on the same terms as any other country that has not agreed a trade deal with the EU.
Failure to agree new rules to govern everything from car parts to camembert cheese are expected to cause backlogs at borders and slow supply chains in a world already hit by COVID-19.
Tesco chairman John Allan has warned that food prices will go up if Britain leaves the EU's orbit with no deal. Raab, asked about the remark, admitted there may be some changes in food prices.
Johnson portrays Brexit as a chance to give Britain a fully independent, more agile, economy. While the EU has claimed that London wants the best of both worlds, with preferential access to EU markets and the advantage to set its own rules.
European Commissioner Mairead McGuinness said she believed "there is a deal to be done," but said it was impossible to predict if negotiations would be successful.
"I hope that we all get a Christmas present over the weekend. An early one," McGuinness, commissioner for financial services, told Ireland's RTE radio.
