Boris Johnson has said it is now “very, very likely” that the UK will leave the EU without a trade deal.
European Commission president Ursula von der Leyen also said on Friday there were “fundamental issues” that remain unresolved.
During the Tory leadership contest in June 2016, Johnson had claimed the chances of a no-deal Brexit were a “million-to-one against”.
The UK’s transition period out of the EU ends on December 31. If a deal is not struck then it will have to trade on World Trade Organisation terms from January.
The British Retail Consortium has warned that supermarkets and their shoppers would be hit with a £3.1bn annual “tariff bombshell” without a deal, with 85% of foods imported from the EU expected to face tariffs exceeding 5%.
Speaking on a visit to Blyth in Northumberland on Friday, the prime minister said he was “hopeful” a deal could be reached and negotiations were continuing in Brussels.
But he said there would need to be “a big change” in the EU’s negotiating position.
“I’ve got to tell that from where I stand now, here in Blyth, it is looking very, very likely that we will have to go for a solution that I think would be wonderful for the UK, and we’d be able to do exactly what we want from January 1 – it obviously would be different from what we’d set out to achieve but I have no doubt this country can get ready and, as I say, come out on World Trade terms,” he said.
Johnson told the cabinet on Thursday to “get on and make those preparations” for a no-deal departure, euphemistically referred to as “Australia-style” by ministers. Australia has no trade deal with the EU.
But Malcolm Turnbull, a former Australian prime minister, said the UK should be “careful what you wish for” as Australia’s relationship with the EU is “not one from a trade point of view that I think Britain would want, frankly”.
Direct talks between Johnson and von der Leyen in Brussels on Wednesday failed to produce a breakthrough.
The paid said Sunday was now the new deadline by which the future of the talks would be decided.
If a trade deal is reached, it will have to be voted through by the UK Parliament as well as the EU Parliament.