Talks on a post-Brexit trade deal look set to go to the wire as Ireland’s prime minister warned that failure to reach an agreement would be “ruinous” for the UK.
Negotiations are expected to continue next week but the European Union believes a deal must be concluded by mid-November in order for it to be ratified by the end of the year, when the current transition arrangements expire.
Downing Street acknowledged that “significant gaps” still remain between the two sides and “time is in short supply”.
Taoiseach Micheal Martin said failure to reach a deal would be “very damaging all around”, with Ireland and the UK particularly affected.
Without a deal being struck, trade between the UK and EU will be subject to tariffs set out by the World Trade Organisation.
Speaking to the BBC, the Irish premier said: “We’ve all had a very significant shock to our economic system because of Covid-19 – the last thing we need now across all of our respective economies is a second major shock.”
Mr Martin also said the UK needs to be “very careful that they do not do anything that could destabilise the politics of Northern Ireland”, and that no deal past the transition period could lead to “tensions that are unnecessary”.
Teams led by the EU’s Michel Barnier and the UK’s Lord Frost have been taking place in London this week.
The Prime Minister’s official spokesman said: “Talks are continuing in London and the negotiators are working hard to bridge the still significant gaps that remain.
“Time is in short supply and there are still significant gaps that remain.”
Boris Johnson has repeatedly said he is prepared to walk away without a deal – something the Government refers to as “Australian terms”.
In response to Mr Martin, the spokesman said: “We have been working hard throughout to get a deal but we’ve always said that it needs to be a deal that fully respects UK sovereignty, and that’s what we’re continuing to pursue.
“Right from the outset I don’t think we’ve been seeking anything that the EU hasn’t agreed to with other sovereign countries, and we’re working hard and will continue to work hard, but it is the case that significant gaps remain.”
The main stumbling blocks between the UK and EU are thought to include the “level playing field” measures aimed at preventing unfair competition on issues including state subsidies, the ongoing row over fishing rights, and how any UK-EU deal will be governed.
Mr Johnson would “like to get a deal” but the transition period will definitely end on December 31 and “we will be ready to leave either on Australian-style terms or with a free-trade agreement if that can be reached with the EU”.
The Prime Minister is “fully confident we will prosper in all circumstances”.
Stefaan de Rynck, an aide to Mr Barnier, called for the UK to sign up to “fair competition standards”.
“A whit of courage for signing up to fair competition standards in the mutual interest of EU and UK would be good,” he said.
Cabinet Office minister Michael Gove argued that Brussels is beginning to understand the UK’s position on what becoming an independent nation means.
He told the BBC: “I think the penny is dropping but negotiations are going on at the moment in order to make sure that those final areas of disagreement are finally resolved.”
Speaking to MPs, Mr Gove was unable to say how many of the estimated 50,000 customs agents needed to cope with the new trading arrangements were in place.
“It is the case there has been a significant increase in the number of customs agents who are being employed both by companies themselves with in-house capacity and also through intermediaries who have been scaling up their own activities as well,” he said.
Mr Gove was meeting business chiefs to help prepare for the new arrangements which come into effect on January 1, outside the EU’s single market and customs union.