Negotiations on a future EU-UK relationship will resume in London this morning, but hope is fading that the talks on a post-Brexit trade deal could finish today.
Downing Street last night claimed that the EU side had placed fresh obstacles in the way of an agreement following pressure from French President Emmanuel Macron.
British officials said the deal could have been reached as early as today.
Sources have told RTÉ News that a deal was unlikely to be reached before Monday.
While the French President has in recent days hardened his position on fisheries, the current stand-off appears to be over the so-called level playing field.
EU officials point out that for months it has demanded that if the UK wants tariff and quota-free access to its single market it cannot unfairly subsidise its companies once outside the framework of the EU’s tough state aid rules.
In particular, EU negotiator Michel Barnier has been arguing for a robust, independent UK regulator to safeguard against any unfair competition.
France is reported to have demanded that the UK should have to get approval from such a regulator before any subsidies were paid, and that that regulator should apply principles shared by both sides.
Brussels also wants EU companies or governments who believe they have been put at a disadvantage by any UK subsidies to have redress through the UK courts.
At present, the European Court of Justice is where such disputes are settled, but London has demanded that the ECJ no longer have any role to play in the UK.
The EU also wants to ensure both sides comply with similar standards when it comes to labour and social rights, as well as environmental and taxation standards, and that if the UK diverges from these standards the EU will be able to take retaliatory action in an area of its choosing.
In recent days, France, Denmark, the Netherlands and Belgium have all indicated to Mr Barnier that he risked straying too far from his mandate in order to secure a deal.
Sources say that last night’s setback is the result of a tougher stance by Mr Barnier that may be reflecting those concerns.
Talks in ‘difficult phase’
The UK Business Secretary admitted the talks were in a difficult phase and said a deal could only be struck if the European Union accepts that Britain is a sovereign nation
“We are at a critical phase,” Alok Sharma told Sky News.
“It is fair to say that we are in a difficult phase, there are some tricky issues still to be resolved.
“Right from the start of this process, we’ve always said that a deal can only be done if the EU recognises that the UK is a sovereign independent nation.
“It is on the basis of that a deal will be done.”
With the Brexit transition period due to end on 31 December, there is little time to get a deal agreed by negotiators and approved by the EU’s leaders, Westminster and the European Parliament.
A senior UK government source said: “At the 11th hour, the EU is bringing new elements into the negotiation.
“A breakthrough is still possible in the next few days but that prospect is receding.”
Fishing and the so-called “level playing field” aimed at preventing unfair competition on state subsidies and standards remain the main issues to be resolved in the talks.
Yesterday, Minister for Foreign Affairs Simon Coveney said there was a “good chance” of a trade deal.
It is reported Mr Barnier is expected to return to Brussels today, but could go straight back to London.
Meanwhile, British Prime Minister Boris Johnson will press ahead with plans allowing ministers to tear up the Brexit divorce deal he has already agreed, despite the current round of UK-EU talks being at a critical stage.
The British government will ask MPs to reinstate controversial legislation giving ministers the power to break international law by ignoring provisions in the Withdrawal Agreement relating to Northern Ireland.
MPs will vote on the UK Internal Market Bill on Monday, potentially throwing the talks on a UK-European Union trade deal into deep crisis unless an agreement can be reached by then.
The EU has already taken the first steps towards legal action over the legislation.
The British government will also introduce the Taxation (Post-Transition Period) Bill, which reportedly includes measures to override parts of the divorce deal struck by the prime minister and the EU in 2019.
MPs will be asked to reinsert the controversial Northern Ireland provisions into the UK Internal Market Bill after the Lords voted to remove them.
Additional reporting Sean Whelan, PA