There is a “strong possibility” no post-Brexit trade deal will be struck with the EU, Boris Johnson has warned.
The prime minister told British citizens and businesses to “make proper preparations” for the scenario, which would come into effect on 1 January 2021.
He added that Brussels’ current offer “isn’t right for the UK” and that a no-deal divorce – what he described as a trading relationship like the one Australia has with the EU – would still be “very good”.
The PM and Ms von der Leyen have set a deadline of Sunday
The stakes were raised as negotiations go right to the brink of the transition period – due to end in a few weeks.
A showdown between Mr Johnson and European Commission President Ursula von der Leyen on Wednesday failed to break the deadlock.
Both leaders have set Sunday as the deadline to decide if talks should fold or continue.
In a short interview from Downing Street on Thursday, the prime minister vowed to “keep going” and “go the extra mile” in pursuit of an agreement.
“The UK has been incredibly flexible,” he said. “We tried very hard to make progress on all sorts of things.”
But he continued: “I do think that we need to be very very clear.
“There’s now a strong possibility, a strong possibility that we will have a solution that’s much-more like an Australian relationship with the EU than a Canadian relationship [trade deal] with the EU.
“That doesn’t mean it’s a bad thing, there are plenty of ways that we can turn that to the advantage of both sides.”
He added: “Now is the time for the public and for businesses to get ready for 1 January – because believe me there’s going to be change either way.”
Mr Johnson identified the two major remaining issues as fishing and the EU’s bid to get the UK to sign up to its business competition demands known as the “level playing field”.
Earlier, Ms von der Leyen said: “We are willing to grant access to the single market to our British friends – it’s the largest single market in the world – but the conditions have to be fair.
“They have to be fair for our workers and for our companies and this fine balance of fairness has not been achieved so far.”
The UK left the EU on 31 January, but has continued to follow most of the bloc’s rules to give negotiators time to try and strike a trade deal while limiting disruption for businesses and travellers.