There is now a “strong possibility” the UK will fail to strike a trade deal with the EU, despite ongoing talks, Boris Johnson has said.
With just three weeks to go until the end of the transition period, the prime minister said he had ordered his ministers to step up preparations for no deal.
The warning comes after he failed to secure concessions during a three-hour face-to-face meeting with the European Commission president in Brussels on Wednesday night.
Mr Johnson was speaking after a meeting of his Cabinet, who he said had agreed that “the deal on the table is really not at the moment right for the UK”.
“What I’ve said to our negotiators is that we’ve got to keep going, and we’ll go the extra mile – and we will. And I will go to Brussels, I will go to Paris, I will go to Berlin, I will go to wherever to try and get this home and get a deal,” he said.
But he added: “What I told the Cabinet this evening is to get on and make those preparations. We’re not stopping talks, we’ll continue to negotiate but looking at where we are I do think it’s vital that everyone now gets ready for that Australian option [no deal].”
It comes after the European Commission on Thursday brought forward new contingency plans of its own for an uncontrolled exit of the UK from the single market, to safeguard “basic road connectivity”, flights, and fishing fleet access.
Britain crashing out is expected to cause significant economic disruption, which could land in the middle of any post-Christmas coronavirus wave.
In a statement issued alongside the EU measures, Ms Von der Leyen said: "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.
"Our responsibility is to be prepared for all eventualities, including not having a deal in place with the UK on 1 January 2021. That is why we are coming forward with these measures today."
In a separate written statement the European Commission warned that the risk of an agreement not being reached was now “significant”.
Negotiators reconvened in Brussels on Thursday for last-ditch talks, and both sides have agreed to decide on Sunday whether they are worth continuing further.
The EU's 27 prime ministers and presidents are meeting in Brussels on Thursday and Friday, where they are being updated on talks by Ms Von der Leyen.
But Brexit is playing fifth fiddle to discussions about the EU budget, climate change, Covid-19, and foreign policy issues. EU officials involved in organising the summit said there were no plans for a full discussion or debate among leaders on talks with the UK. "I am a bit more gloomy today, as far as I can hear," Swedish prime minister Stefan Lofven said on arrival at the meeting.
Danish PM Mette Frederiksen, whose country has often sided with the UK in internal EU disputes, told reporters that a deal could be so bad that "it is not worth adopting".
"It takes two to tango and the EU has shown that all the way but we will not make an agreement that undermines companies in Denmark, Sweden or Germany and we need a good agreement on fisheries," she said.
Asked whether the EU could show more flexibility, she said: "No. We can offer many things but no flexibility."
David Sassoli, the president of the EU parliament, which has final sign-off on a deal, told reporters: "She was not really confident that all difficulties could be resolved."
Back in London, Mr Johnson said the main blockages in talks were the perennial issues of fisheries, and a demand by the EU for stronger guarantees that the UK would not undercut its labour and environmental standards in future.
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