Northern Ireland is on a "glide path" toward greater UK intervention without a political deal, James Brokenshire has warned.
If the parties at Stormont do not reach agreement on restoring powersharing within a short number of weeks more decision-making powers could be assumed by Westminster - starting with the passing of a budget for public services, the Northern Ireland Secretary said.
The DUP and Sinn Fein have held intensive private talks over recent weeks to establish whether there is any prospect of agreement on issues like passing an Irish language act.
Mr Brokenshire said: "If things don't change we are on a glide path to greater and greater UK government intervention.
"But I believe we can change course.
"This can be achieved with political leadership and with support of the people of Northern Ireland - including communities and businesses."
For nine months government has been effectively in the hands of civil servants rather than accountable politicians who cannot agree on returning to devolved coalition government.
Mr Brokenshire added: "This has meant there has been no political direction to tackle the fundamental challenges facing Northern Ireland - including the reform and transformation of critical public services."
He said passing a budget at Westminster for public services in Northern Ireland this year would be profoundly a backward step.
"But in the continuing absence of devolution the UK Government retains ultimate responsibility for good governance and political stability in Northern Ireland as part of the UK - and we will not shirk from the necessary measures to deliver that."
The main parties have been deadlocked over cultural issues like passing an Irish language act to protect its use in public settings plus measures to deal with the legacy of decades of violence.
Late Sinn Fein deputy first minister Martin McGuinness resigned at the start of the year and plunged the devolved institutions led by his party and the Democratic Unionists into crisis.
Political leaders at Stormont have been attempting to restore them ever since.
Mr Brokenshire told business leaders at an event at Queen's University in Belfast it was right that decisions over local services like health, education, transport and economic development were taken by local politicians.
He said that was why he was working intensively to secure the re-establishment of inclusive and stable devolution.