Chancellor Philip Hammond says the Government continues to hold Brexit talks with Labour to break the deadlock - and he expects some form of agreement.
He spoke out after it emerged that Theresa May's hopes of a Brexit compromise with Jeremy Corbyn are on the brink of collapse.
Mr Hammond suggested today that talks are progressing and claimed Mrs May does not have any red lines in her ongoing talks with Jeremy Corbyn as she tried to avoid leaving the EU without a deal.
The Chancellor also said most European Union states understand the UK needs more time to work out a deal after failing to reach one before the March 29 deadline.
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He says he's optimistic about the outcome of the EU's summit on Brexit next Wednesday after the Prime Minister asked for an extension to June 30.
Mr Hammond spoke to reporters as he arrived for a meeting of EU finance ministers in Bucharest.
It emerged yesterday that Mrs May's hopes of a Brexit compromise with Mr Corbyn are on the brink of collapse, after Labour accused the Prime Minister of refusing to change her deal.
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Downing Street offered further talks this weekend after efforts to find a breakthrough stalled, but Labour said Mrs May had to come forward with "genuine changes".
Shadow Brexit secretary Sir Keir Starmer said the Government was refusing to consider amendments to the Political Declaration - the document setting out the framework for a future relationship with the European Union.
One of Labour's key demands has been a customs union with the EU after Brexit, something it would want to be written into the document.
But Downing Street contradicted Sir Keir, insisting the Government was prepared to make changes to the Political Declaration.
The Prime Minister faces resistance from the EU to her call for a further short delay to Brexit.
And she also faces further fury from Conservative Brexiteers over the prospect of an extension to Article 50 which would require the UK to take part in the May 23 European Parliament elections.
Mrs May wants to terminate any extension before the European polls if she is able to get a deal through Parliament, something she had been hoping Mr Corbyn's Labour MPs could help with.
The Prime Minister wrote to European Council president Donald Tusk on Friday requesting the delay to Brexit, which would otherwise happen at 11pm on April 12.
Mrs May said she will seek to secure ratification of the deal before European elections on May 23, but will make "responsible preparations" for the UK to take part in the polls if that does not prove possible.
The request will be considered at an emergency EU summit on April 10, where it requires the unanimous agreement of the leaders of the remaining 27 member states.
