"Major differences" remain between the UK and European Union in reaching a post-Brexit trade deal, Downing Street has said after crunch talks between Boris Johnson and Ursula von der Leyen made little headway and the situation remains "very difficult".
The prime minister and European Commission president agreed that a “firm decision” about the future of the negotiations should be made by Sunday.
Discussions will continue between the UK and EU’s negotiating teams over the next few days in a bid to resolve the remaining issues.
Boris Johnson leaves the European Commission after dinner with Ursula von der Leyen
The UK's negotiator Lord Frost and his European counterpart Michel Barnier joined the two leaders and a "handful of other officials from both sides" at the dinner, at which the "main issues" of fisheries, level playing field and governance were discussed.
In a statement following a three-hour long dinner in Brussels, a Downing Street spokesperson said: “The prime minister and president von der Leyen met for dinner in Brussels this evening.
“The leaders had a frank discussion about the state of play in the negotiations.
“They acknowledged that the situation remained very difficult and there were still major differences between the two sides.
“They agreed that chief negotiators would continue talks over the next few days and that a firm decision should be taken about the future of the talks by Sunday.
“The prime minister is determined not to leave any route to a fair deal untested, but any agreement must respect the independence and sovereignty of the UK.”
Ms von der Leyen said the negotiating teams should “immediately reconvene” to try to resolve the “essential issues” but stressed that the positions remained “far apart”.
She said in a statement: “We had a lively and interesting discussion on the state of play across the list of outstanding issues.
“We gained a clear understanding of each other’s positions. They remain far apart.
“We agreed that the teams should immediately reconvene to try to resolve these essential issues. We will come to a decision by the end of the weekend.”
ITV News' Europe Editor James Mates explains how both parties have agreed to have a firm decision by the end of the week
Speaking on ITV's Peston, Cabinet minister Robert Jenrick said there are still “very significant areas of disagreement” between the UK and the European Union around reaching a Brexit deal.
Robert Jenrick told ITV News Political Editor Robert Peston that while there had been “good discussion” between Mr Johnson and Ms von der Leyen, “there was no clear movement in the right direction”.
Speaking about the talks between the pair on Wednesday, he said: “It sounds as if, from the conversations I’ve had with the prime minister’s team tonight, that there are still very significant areas of disagreement.
“So I don’t want to give false hope, but he did conclude with Ursula von der Leyen that we should get the teams back together in the coming days and they will work hard to see if there is a way forward until Sunday.”
Mr Jenrick continued that "very significant areas are still stake" and that Mr Johnson had been very clear on the UK's position of wanting to retain "sovereignty" and not "remain bound to the EU" in terms of governance.
Should the UK not achieve a deal with the EU, the housing secretary predicted that the country would "thrive and prosper in any circumstances" because the "fundamentals of the economy are strong".
Time is running out to reach a deal before the deadline of December 31, when the UK stops following EU trading rules.
If no deal is reached, World Trade Organization tariffs will be imposed on imports and exports between the UK and the bloc.
Any deal agreed between the two teams of negotiators must be ratified by all the heads of the EU member states and also MPs.
After news of the continuation of discussions, Speaker Sir Lindsay Hoyle said the House of Commons could sit as late as Christmas Eve should it be required to look at a Brexit deal.
Under current plans, the Commons will stop sitting on December 21, but he told Sky News recess could be delayed.
He told the broadcaster: “I would like to believe that we will all be going up on the date that’s expected of the House.
“But if needs be, the House is the servant and I am happy as being that servant to ensure we can run, as far as I’m concerned, even up to Christmas Eve.
“I would like to believe we can finish on the Monday before Christmas. I would like to put everything to bed and get everybody away from here.”
ITV News' Political Correspondent Carl Dinnen looks into what this all means for Northern Ireland as businesses are concerned about the grace period and what happens next
Labour's Rachel Reeves hit out at Mr Johnson and told him "to get it done".
“The Prime Minister promised an oven ready deal," she said.
"He needs to get it done so we can focus on what matters to the British people: securing our economy, protecting our NHS and rebuilding our country."
While her colleague Angela Rayner said the PM had "completely failed" to deliver an "over-ready deal".
SNP Westminster leader Ian Blackford tweeted: "A no deal would be a massive failure of diplomacy and leadership which @BorisJohnson has to take ownership of.
"On top of the health & economic impact of covid this is self induced self harm. Disruption to trade, tariffs, higher prices and lost jobs is never a price worth paying."
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 meeting was held a day before a European Council summit on Thursday where Ms von der Leyen is expected to debrief the leaders of the 27 member countries on the state of play with the negotiations.
Speaking on his show, ITV News Political Editor Robert Peston said he "understood" Ms von der Leyen did not want to end talks on Wednesday as the prospect of no-deal would "overshadow" the summit on Thursday.
He added he believes no-deal is now more likely than a trade agreement.
During Prime Minister’s Questions earlier on Wednesday, Mr Johnson set out the main problems he has with the EU’s position, although he said “a good deal is still there to be done”.
Addressing the issues which have repeatedly stalled negotiations - issues over fishing rights, the “level playing field” measures aimed at preventing the UK undercutting the EU on standards and state subsidies, and the way that any deal would be governed - the PM said: “Our friends in the EU are currently insisting that if they pass a new law in the future with which we in this country do not comply or don’t follow suit, then they want the automatic right to punish us and to retaliate.
“Secondly, they are saying that the UK should be the only country in the world not to have sovereign control over its fishing waters.
“I don’t believe that those are terms that any prime minister of this country should accept.”
He again insisted the UK would “prosper mightily” with or without a deal – a claim which has been disputed by economic experts including the Office for Budget Responsibility and the governor of the Bank of England.