Post-Brexit trade talks will continue on Monday after negotiators failed to reach an agreement over the weekend.
The EU’s chief Brexit negotiator Michel Barnier and his UK counterpart David Frost met in Brussels on Sunday, but key issues remain unresolved.
The European Parliament said talks needed to have ended on Sunday in order for it to ratify a deal by 31 December.
A UK government source told the BBC a deal will not be reached unless there is a “substantial shift” from Brussels.
It is understood there is likely to be a decision before Christmas on whether or not a deal can be reached.
David McAllister, a German MEP and chairman of the European Parliament’s Foreign Affairs Committee, said the European Parliament will not be in a position to grant consent to an agreement this year, as a deal was not reached by midnight on Sunday.
Writing on Twitter, Mr McAllister said an extraordinary meeting of MEPs will be convened on Monday morning to discuss next steps.
One potential option, should the two sides reach a deal in the coming days, would be for the European Parliament to approve it in principle by 31 December before completing the formal ratification process early next year.
In such an event, short-term measures could potentially be put in place to minimise disruption to cross-channel trade before new legally-binding rules come into force.
The UK and the EU have until 31 December to agree a trade deal, plus other points, such as fishing rights.
Mr Barnier said talks were at a “crucial moment”, but any agreement must be “balanced and reciprocal”.
“We respect the sovereignty of the UK and we expect the same. Both the EU and Britain must have the right to set their own laws and control their own waters. And we should both be able to act when our interests are at stake,” Mr Barnier wrote on Twitter on Sunday.
Whitehall sources have said that it is increasingly likely that the UK will emerge from the transition period without a free trade agreement with the EU.
This will mean that, from 1 January, both sides will rely on World Trade Organization (WTO) rules to govern exports and imports. Tariffs could be introduced on goods being sold and bought, potentially affecting product prices.
A government source told the BBC the EU was “still struggling to get the flexibility needed from member states” to make a deal possible”.
The impasse in the talks has led to fresh calls from opposition leaders, including the Lib Dems’ Sir Ed Davey, for the UK’s post-Brexit transition period, due to end on 31 December, to be extended to allow discussions to continue.
If Boris Johnson has any regard for British businesses and communities he will negotiate an extension to the transition period immediately.— Ed Davey MP 🔶🇪🇺 (@EdwardJDavey) December 20, 2020
Scottish First Minister Nicola Sturgeon said such a move was “imperative” given the challenge the whole of Europe were facing from the pandemic.
She tweeted: “The new Covid strain means we face a profoundly serious situation. It demands our 100% attention. It would unconscionable to compound it with Brexit.”
And Simon Hoare, the MP for North Dorset, became the first senior Conservative to publicly call for a short extension, saying it was a “time for maturity” and the moment to “temporarily stop the clock” on the talks.
“There’s no Parliamentary time to scrutinise and agree a deal and daily clarity of the dangers to our already pressured economy of no deal is alarming,” he wrote on Twitter.
After months of negotiations, and during this past weekend, the vast majority of the EU-UK trade and security deal has been agreed.
While there remain a number of loose ends, the main focus now in talks is fish.
Prime Minister Boris Johnson promised a return of sovereignty over UK waters after Brexit – and that is what he has been pushing for.
But the EU insists member states’ fishing fleets must retain some access, or – it has threatened – there’ll be no trade agreement at all.
Both sides say they’re committed to trying to reach a deal. But time really is running out now.
The government has long ruled out any extension to the process, insisting the UK is prepared whatever the outcome of the talks, having passed key legislation in recent months.
Any deal reached would need to be agreed by parliaments in the UK and the European Union’s member states.
British MPs have now finished for the Christmas break, but Cabinet Office minister Michael Gove said on Thursday they could be called back to ratify a deal in the coming days, were one to be agreed.
- Brexit happened but rules didn’t change at once: The UK left the European Union on 31 January 2020, but leaders needed time to negotiate a deal for life afterwards – they got 11 months.
- Talks are happening: The UK and the EU have until 31 December 2020 to agree a trade deal as well as other things, such as fishing rights.
- If there is no deal: Border checks and taxes will be introduced for goods travelling between the UK and the EU. But deal or no deal, we will still see changes.