German Chancellor Angela Merkel urged Brussels to plan for a Brexit no-deal with the UK today.
A deadline for extending the 11-month transition has passed – piling pressure on negotiators to strike an agreement.
Officials have until December 31 to secure a trade pact, with Britain due to leave the EU single market and customs union in less than six months.
Mrs Merkel warned the German parliament the bloc “must and should prepare for a situation in which an agreement does not happen”.
She added: “The progress made during the negotiations have been, to put it mildly, minimal.
“With Great Britain, we have agreed to speed up these negotiations to be able to agree on a deal in autumn, which would then also need to be ratified until the end of the year.”
Boris Johnson’s spokesman said: “It was never our intention to extend the transition period.
“We want to continue to work constructively with the EU and we believe that there is a free trade agreement to be reached.
“But we have also been very clear that we will be prepared for either eventuality at the end of the year, whether that be an FTA (free trade agreement) or a trading relationship based on the same terms Australia currently has.”
While Britain formally left the bloc on January 31, exit triggered a transition to allow time to agree a trade deal.
Talks are continuing in Brussels between the teams led by the Prime Minister’s Europe adviser David Frost and the EU’s chief negotiator Michel Barnier.
Anti-Brexit campaigners intensified their warnings over failing to strike a trade agreement.
Best for Britain chief executive Naomi Smith said: “The German Chancellor’s statement highlights two deeply worrying patterns.
“The first is the continued lack of progress, despite the Government refusing to extend the transition period.
“It is clear from all the available data that a failure to secure a comprehensive trade deal with the EU by the end of the year would amount to throwing what limited economic recovery we see in the second half of 2020 down the drain.
“The second is how unprepared we are in the UK for the possibility of that failure.
“Some preparations for leaving without a deal were carried out last year, but those provisions have been swallowed by the need to combat coronavirus.
“If the Government is serious about getting this country back on its feet and levelling up our economy, it must start to negotiate in good faith to secure the ‘comprehensive trade deal’ promised to voters at the last election as part of the Conservative manifesto.”