Food prices in the UK will rise if the Brexit transition period ends without an EU trade deal being agreed, Number 10 has admitted.
Boris Johnson's official spokesman accepted that EU-imposed tariffs could see a small rise in the price of some food products, if a trade deal is not reached, but exchange rates and other factors, such as fuel could drive costs up and "have an impact on food availability".
The spokesman said time remaining to reach a trade deal is "obviously in very short supply" and negotiations, which are continuing in Brussels this week, are "in the final stages".
The comments come ahead of a call between the PM and European Commission President Ursula von der Leyen, which is aimed at breaking the logjam to achieve a post-Brexit trade deal.
The call follows a weekend of tense negotiations between UK chief negotiator Lord David Frost and his EU counterpart Michel Barnier, which ended without an agreement being reached.
The main sticking points remain fishing rights, governance of the deal and the so-called level playing field - the latter being the "most difficult", according to Paymaster General Penny Mordaunt, who updated MPs on the state of talks.
The PM's spokesperson said Downing Street is prepared to negotiate for "as long as we have time available" after Mr Barnier reportedly told MEPs the deadline for talks succeeding is Wednesday.
He said: "Time is obviously in very short supply and we're in the final stages, but we're prepared to negotiate for as long as we have time available, if we think an agreement is still possible."
"Significant differences remain on critical issues, fisheries being one of them, and that is one of the issues that is currently being negotiated by the team in Brussels today," he added.
On food prices, the spokesman referred to Environment Secretary George Eustice's comments, who said there would be a less than 2% rise on some products as a result of tariffs, but could be higher on products such as beef and pork.
Brexit trade talks - the sticking points at a glance:
- Fishing rights: The UK wants total control over its own fishing waters after the Brexit transition period ends, with a 12 mile exclusion zone around the British Isles banning all foreign vessels. The EU wants the UK to stick to the Common Fisheries Policy, an EU agreement which gives member nations the rights to fish in European waters - more here.- Level Playing Field: This is a concept all EU nations agree to, which ensures member nations cannot undercut others by setting their own rules on issues such as the environment, taxation and state aid. The EU says a zero-tariff trade deal is dependent on the UK agreeing to a level playing field. The UK disagrees, saying a fundamental aspect of Brexit is that the UK will be able to set its own rules.- Governance of a deal: It's likely that any trade deal will eventually result in disputes. The EU wants the European Court of Justice to be the final authority in ruling over disputes. The UK says the ECJ should have no role and final decisions should be made by a bespoke arbiter.
The spokesman added: "The other point I would make ... The big drivers of food prices are exchange rates and also other factors, such as fuel costs and weather events, that can have an impact on food availability."
Cabinet Office Minister Michael Gove has also been in Brussels, along with Lord Frost and Michel Barnier, for discusssions with European Commission Vice President Maroš Šefčovič - his EU counterpart on the Withdrawal Agreement Joint Committee.
Following talks, the UK government has said it is prepared to remove three controversial clauses from the UK Internal Market Bill - the infamous piece of legislation that could see the UK breach international law - if a deal can be reached.
ITV News Political Editor Robert Peston says the move to remove controversial aspects of the Bill is "an elegant attempt" by the prime minister to "render harmless" the controversial clauses.
It has been reported that 99% of a trade deal has been agreed, aside from the remaining issues, but Downing Street said if differences cannot be bridged, the UK will leave without any agreement whatsoever.
Asked if a series of mini-deals could be brokered on the areas already agreed between the two sides, the spokesman said: "I think we've been clear that if we can't reach an FTA we will leave on Australian terms."
He also said: "Australia terms would mean the UK trades with the EU under WTO terms based on the principles of free trade."
Minister James Cleverly told ITV News it is "impossible to predict" whether a deal will be reached before the end of the year, with a "small number of significant points" still yet to be agreed.
He said "time is tight" but negotiators "will keep working" towards reaching a deal.
Asked whether MPs would be expected to sit in Parliament through the Christmas period in order to ratify a deal, if one is reached, the minister said "it's reasonable to expect Parliament to work hard to get that through".
The PM's spokesman ruled out negotiations continuing into the New Year if talks fail before December 31.
On Sunday, ITV News Political Editor Robert Peston detailed a "reasonable worst case scenario", documented in the government's planning assumptions.
Among the potential effects are a reduction in medicine supply and a rise in food and fuel costs.
Citing Peston's report, Good Morning Britain's Piers Morgan asked Cabinet minister Cleverly if this is the government's position.
"When I was a minister at DExEU (Department for Exiting the EU) I lost track the number of times I had to explain what a reasonable worst case scenario document is," he said.
"It is not a prediction, it is not saying what will or is even likely to happen, it is a document that describes the worst case scenario to allow governments to plan mitigations.
"In the same way that a seat-belt is a mitigation for a reasonable worst case scenario that you have an accident in your car."
Meanwhile, the controversial UK Internal Market Bill is back in the Commons on Monday.
MPs will vote on whether to overturn amendments by the House of Lords which removed controversial aspects of the Bill relating to the Irish border.
On Wednesday, MPs will then go on to consider the Taxation (Post-Transition Period) Bill which contains further similar provisions, which have infuriated the EU.