Boris Johnson and European Commission President Ursula von der Leyen have agreed to hold face-to-face talks within days in a bid to find a way through the Brexit deadlock.
In a joint statement both sides said the conditions for a post-Brexit trade agreement were not there and that significant differences remained on fishing, the level playing field and governance.
The announcement followed a lengthy phone call between the two, their second in as many days.
Each side has asked their chief negotiators and their teams to prepare an outline of the remaining differences.
These will be discussed in a physical meeting in Brussels in the coming days, they said. The decision paves the way for a final showdown between the two leaders later this week.
A senior government source said: Talks are in the same position now as they were on Friday. We have made no tangible progress. It’s clear this must now continue politically. Whilst we do not consider this process to be closed, things are looking very tricky and there’s every chance we are not going to get there.
The EU has signalled that the final deadline for a deal is Wednesday. Earlier Mr Johnson offered to drop clauses in his government’s Brexit Bill that would break international law, in a bid to break the impasse.
The government said it would remove the clauses if the solutions being considered in separate talks over the operation of the Northern Ireland Protocol prove successful.
Earlier the EU’s chief negotiator and his UK counterpart Lord Frost spent the day talking in Brussels after a similar round of negotiations in London last week failed to break the stalemate.
Downing Street has said it is prepared to continue talks for “as long as we have time available”, though it admits time is in very short supply.