London and Brussels are expected to agree to more talks on an elusive trade agreement, but have a long way to go to avert a turbulent "no deal" exit for Britain from the European Union's orbit on December 31, EU sources say.
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British Prime Minister Boris Johnson and the president of the EU's executive Commission, Ursula von der Leyen, gave negotiators a Sunday deadline to find a way to resolve an impasse on arrangements that would guarantee Britain zero-tariff and zero-quota access to the EU's single market.
Johnson and von der Leyen would be in touch on Sunday and EU sources said a statement was expected about 1130 GMT (2230 AEDT) on whether to abandon the negotiations or keep trying for an 11th-hour deal.
Both said on Friday that a "no deal" was now the most likely outcome but EU sources said on Sunday they expected efforts to continue.
"They are making some inroads on difficult stuff. How to manage divergence and soften the blows for (EU) fishermen is still open," one EU diplomat said.
British Foreign Secretary Dominic Raab said the bar was quite high for continuing discussions but that negotiations could "drag on". "Never say never," he told the BBC, saying the British side needed the EU to shift position on two issues.
"We want to be treated like any other independent self-respecting democracy. If the EU can accept that at a political level, then there's every reason to be confident but there is still, I think, a long way to go," he told Sky News.
On the same program, Spanish foreign minister Arancha Gonzalez Laya retorted: "A trade deal is not made to assert one's independence but to manage our interdependence."
Britain quit the EU in January but remains an informal member until December 31 - the end of a transition period during which it has remained in the EU single market and customs union.
A Brexit without a trade deal would damage the economies of Europe, send shock waves through financial markets, snarl borders and sow chaos through the delicate supply chains across Europe and beyond.
The two sides have struggled to agree on fishing rights in British waters and EU demands that Britain face consequences if in the future it diverges from the bloc's rules for fair competition - what it calls a level playing field.
The British government has warned that even with a trade deal, 7000 trucks heading for Channel ports in southeast England could be held in 100-kilometre queues if companies do not prepare the extra paperwork required.
The Ministry of Defence said four Royal Navy patrol ships would be ready on January 1 to help protect Britain's fishing waters in the event of no deal.
France on Saturday shrugged off the naval deployment plans.
"Keep calm and carry on," an official at the French presidential office told Reuters, using a British wartime slogan.
Australian Associated Press
