A no-deal Brexit is "more likely than ever before", the president of the European Council has warned, ahead of a make-or-break summit of EU leaders in Brussels.
Donald Tusk, who has described this week's top-level meeting as "the moment of truth", said Brexit had "proven to be more complicated than some may have expected".
But he said that "that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible".
Mr Tusk's warning, made in a letter to EU leaders formally inviting them to the summit, comes a day after negotiations between the European Commission and UK Government hit a a wall over the question of how to prevent a hard border in Northern Ireland.
Over dinner on Wednesday night the heads of state or government of the 27 remaining EU member states will decide whether there is any pointing holding a special Brexit summit in November – or whether the horse has already bolted.
It is now confirmed that Theresa May will address the 27 leaders before the dinner in a last-ditch bid to win them over; though she will not be allowed into the main discussion itself.
Despite apparent technical agreement between officials on both sides after intensive work at the weekend, Brexit Secretary Dominic Raab rejected the compromise plan after travelling to Brussels for a meeting with Michel Barnier that had been expected by some to seal the deal.
The sticking point is still over whether Northern Ireland would be treated differently to the UK in customs and regulatory terms, in order to prevent it having a border with the Republic.
“[In Salzburg] leaders said that they will have an additional European Council in November if there has been progress. This needs to be decided on Wednesday, if there is enough progress,” one senior EU diplomat speaking in Brussels on Monday said.
Member states have been kept somewhat in the dark during the latest round of talks, during which Britain and the EU have gone into a communications blackout “tunnel” so that they can focus on solving problems.
“The Commission said they would descend together with the British into the tunnel. That’s what they did. You hear more from the tunnel than we did,” the senior diplomat said.
“We don’t really know yet what really happened and what the real problem was,” the diplomat confessed, adding that they expected “transparency” and updates at a meeting between the 27 countries’ Europe ministers and Michel Barnier in Brussels on Tuesday.
But the diplomat expressed doubts about whether it was even legally possible to negotiate the UK-wide customs arrangement sought by the British government under the terms of Article 50.
“Article 50 is the legal basis for solving the withdrawal issues, but Article 50 is not the legal basis for solving the future relationship on a permanent basis between the UK and EU,” they warned.
In his letter to the leaders, Mr Tusk said: "As you remember from Salzburg, we wished for maximum progress and results that would lead to a deal in October. As things stand today, it has proven to be more complicated than some may have expected. We should nevertheless remain hopeful and determined, as there is good will to continue these talks on both sides.
"But at the same time, responsible as we are, we must prepare the EU for a no-deal scenario, which is more likely than ever before. Like the UK, the Commission has started such preparations, and will give us an update during the meeting.
"But let me be absolutely clear. The fact that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible, for all sides. This is what our state of mind should be at this stage. As someone rightly said: 'It always seems impossible until it's done.' Let us not give up."
Ms May said in a statement in the House of Commons on Monday that a Brexit deal was this "achievable" despite differences between the two sides. Asked what would happen if no deal was struck, the PM said she would consult with MPs on the way forward.
"If it doesn't work out this week, we must continue negotiating, that is clear - but time is pressing," she told the Commons.