British negotiator David Frost arrived at European Commission headquarters in Brussels to see his EU counterpart Michel Barnier on Sunday, the deadline for post-Brexit trade talks to make progress or fail.
UK Prime Minister Boris Johnson and EU Commission chief Ursula von der Leyen were due to talk by phone later in the day, to decide whether a deal is close or whether the talks should now be abandoned.
There is to be a meeting in Paris on Monday between French President Emmanuel Macron, Charles Michel, the president of the European Council, and EU chief von der Leyen.
Tensions rising as deadline nears
Sunday is just the latest in a string of supposedly hard deadlines for the negotiations but, with Britain due to leave the EU single market in 19 days, tensions are rising.
On Saturday, Britain took the dramatic step of announcing that armed naval vessels will patrol its waters from 1 January to exclude European crews from the fisheries they have shared, in some cases for centuries.
Brexit: discussions difficiles, la Royal Navy mobilisée en cas de "no deal" https://t.co/cwsvGb6GYA pic.twitter.com/fvG56uSA6V
— Courrier inter (@courrierinter) December 12, 2020
Brussels' tone has been less bellicose, and von der Leyen has made it clear that the EU will respect UK sovereignty after Britain's post-Brexit transition period, but neither side is yet ready to compromise on its core principles.
What will happen if there's no deal?
Without a trade deal, cross-Channel trade will revert to WTO rules, with tariffs likely to drive up prices and generate paperwork for importers.
On Wednesday, after what von der Leyen described as a "lively and interesting" working supper with Johnson in Brussels failed to find a breakthrough, the EU chief said they had agreed to "come to a decision by the end of the weekend".
Much of the text of a possible trade deal is said to be ready, but Britain has rejected Brussels' insistence on a mechanism to allow it to retaliate if UK and EU law diverge in a way that puts continental firms at a competitive disadvantage.
European Union red line
"The defence of the single market is a red line for the European Union. What we have proposed to the United Kingdom respects British sovereignty. It could be the basis for an agreement," a senior EU source said, echoing an earlier von der Leyen statement.
In London, a spokesman for the Johnson government stressed that Britain was ready to leave the union and handle its own affairs after 47 years of close economic integration and that "as things stand, the offer on the table from the EU remains unacceptable.
London's moneymen worried
Britain's financial sector is watching nervously as the prospect mounts of a "no-deal" Brexit, stoking fears of lost clients and influence in key areas, as well as market turbulence.
The Bank of England, where most risk is centred, is bracing for the end of the transition period on 31 December, with no sign of a free-trade agreement between the European Union and Britain.
The central bank said a "no-deal" result could lead to "some market volatility and disruption for financial services, particularly to EU-based clients".
La banque Morgan Stanley déplace 120 milliards de Londres à Francfort, à l'approche du Brexit https://t.co/XAPGzJvViS pic.twitter.com/XkzFvsN6ro
— lalibre.be (@lalibrebe) December 10, 2020
Investment bank Morgan Stanley is predicting a 6-10 percent fall in the FTSE-250 index and a 10-20 percent drop in banking stocks, which have already been hit by the coronavirus.
From 1 January, Britain's financial sector and the City of London financial district will lose the right to sell products and financial services across the EU.
