Prime minister Boris Johnson has said that it will be time to accept that there will be no free trade agreement with the EU and “move on” if a deal is not in place by October 15.
Fisheries and state aid remain two key areas of disagreement with negotiations said to resume for an eighth round of talks in London this week.
Johnson said on Monday: "We are now entering the final phase of our negotiations with the EU. The EU have been very clear about the timetable. I am too.
"There needs to be an agreement with our European friends by the time of the European Council on October 15 if it’s going to be in force by the end of the year.
"So, there is no sense in thinking about timelines that go beyond that point. If we can’t agree by then, then I do not see that there will be a free trade agreement between us, and we should both accept that and move on."
The PM has said that the UK “cannot and will not compromise on the fundamentals of what it means to be an independent country" to secure a trade deal with the bloc.
The government is also planning to publish the Internal Market Bill this week, which will formalise trading rules within the British Isles after the post-Brexit transition period - in which the UK continues to follow EU rules - lapses in December.
The Bill will enable the UK to sign future trade deals, yet the Financial Times reported over the weekend that certain aspects of the legislation will override key elements of the Withdrawal Agreement, including on state aid and customs in Northern Ireland, which are seen as essential to avoiding a hard border on the island of Ireland.
Under the Northern Ireland protocol, the region will continue to adhere to some EU rules and enforce the bloc’s customs at its ports after the transition period to avoid a hard border.
Downing Street has said that the new bill will act as a standby plan in case of a no-deal scenario.
Meanwhile, the EU’s chief negotiator Michel Barnier has hit out at the UK government, accusing it of wanting “the best of both worlds” on trade.
This week’s talks will focus on allowing UK and EU firms to trade free of taxes and customs checks, but foreign secretary Dominic Raab has warned that the UK will not simply “haggle away” the issues of state aid and fisheries, calling them the “two outstanding bones of contention” which are the barrier to a deal as it stands.
The UK has been clear that it favours a free trade agreement with the EU that is similar to the one Canada has in place, but the prime minister has said that a no-deal situation would lead to a "trading arrangement with the EU like Australia's" which he called a "good outcome for the UK."
In practice, a similar trading agreement to Australia will use trade protocols set out by the World Trade Organization, meaning export tariffs and customs checks would be in place.
In other news, the chiefs of the UK’s 20 biggest airports have written to the prime minister and chancellor to warn that “irreparable damage” will be dealt to the economy unless the UK quarantine law is replaced by Covid-19 testing within the next seven days.
The letter, signed by the chief executives of Heathrow, Gatwick, Manchester, Birmingham and Luton airports among others, said that the government must give testing the green light within a week as part of a number of initiatives to prevent the loss of 110,000 jobs in the aviation sector and related industries.
The industry leaders warned that the sector had already lost out on £4 billion and that it would likely take four years for pre-pandemic levels of travel to return.
Conservative MP Huw Merriman, chair of the transport select committee, said that the government’s failure to endorse airport testing posed “further barriers to travel”.
Dominic Raab said over the weekend that the government was considering plans to reduce the 14-day quarantine window by requiring arrivals from ‘red list’ countries to take a test when arriving and a second after five or eight days.
A debate is scheduled to take place in the House of Commons on Thursday, where Conservative MPs will call on the government to back airport testing, introduce regional travel corridors and provide further support to the aviation industry.
The government also told the transport select committee on Sunday that it would devise an aviation strategy in the autumn, which will include reforms on how airlines are allocated slots and consulting on aviation tax changes such as air passenger duty.
On Sunday, England saw its largest daily increase of Covid-19 infections since May, with the confirmation of 2,988 new cases.
Elsewhere, a new task-force has been established in England with the aim of tackling regional inequality, as part of the government’s ‘levelling up’ agenda.
The government has said that it wishes to crack down on regional disparities in the country, with the new task-force including many of the 2019 intake of Conservative MPs from “red wall” constituencies previously held by Labour.
The new group says that areas that have seen the lowest growth in earnings should see wages rise faster than in recent years, and areas with the worst unemployment rate should come in line with the national average, as should areas with the lowest employment rate.
It has also urged the government to set out geographical analysis of how tax and spending changes impact different areas, warning that boosting the “lagging areas” in Britain will be “critical” to the success of the party in future elections.
A report by the Onward think tank produced for the task-force shows that the Conservatives now hold more seats in the lowest paid areas of the country than the Labour party.
As part of the wider ‘levelling up’ agenda, the Telegraph reports that rural communities could have their own directly elected mayors to lobby for more government funds.
The report also says that communities may be allowed to scrap metropolitan names introduced in 1974 and revert back to historic county titles.
Under the proposals, up to 30 local mayors will represent rural areas to lobby for more resources from towns and cities, in a bid to decentralise how public money is spent.
The Telegraph quotes one of its sources as saying: "Levelling up is not just about helping inner Liverpool.
"We are going to end the obsession of just devolving power and money to the big cities, which is really important."
A spokesman for the Ministry of Housing, Communities and Local Government said: "We want to devolve and decentralise to give more power to local communities, providing opportunities for all areas to enjoy devolution.
"But there will be no blanket abolishment of district councils and no top-down restructuring of local government. The devolution White Paper, which will be published this autumn, will set out our detailed plans and we continue to work closely with local areas to establish solutions to local government reform.”