Talks between the UK and EU are due to resume later in a final bid to agree a post-Brexit trade deal.
After a weekend of tense negotiations, EU sources told the BBC an agreement on fishing was close – but this was disputed by Downing Street.
The UK’s chief Brexit negotiator, Lord Frost, will continue talks with EU counterpart Michel Barnier.
And Prime Minister Boris Johnson will speak later to European Commission President Ursula von der Leyen.
The BBC has learned that Mr Barnier briefed EU ambassadors early on Monday morning that “divergences” remain, also telling them that he was neither optimistic nor pessimistic, but “realistic” about the prospects of a deal being reached.
He also said the claim that progress had been made on fishing rights was not true.
Cabinet Office Minister Michael Gove is also going to Brussels for a meeting with European Commission Vice-President Maroš Šefčovič.
If no deal is done by the end of the year, the UK and EU will introduce tariffs and border checks on goods.
Negotiations resumed on Sunday, with disputes over fishing rights, competition rules and how to enforce agreed rules still causing problems.
EU sources suggested on Sunday evening that a breakthrough in talks on fishing was close to being made.
The EU says that, without ongoing access to UK waters for its fleets, UK fishermen will no longer have special access to EU markets to sell their goods.
But the UK says what goes on in its own waters should be under its control as a sovereign country.
The two sides have been discussing a transition period where access could be reduced over time.
One senior EU diplomat told the BBC that fishing “was definitely not the issue the talks are stuck on”.
But this was quickly followed by a No 10 source saying there had been “no breakthrough”, adding: “Nothing new has been achieved on this.”
Both sides are clear that disputes remain on the two other sticking points – the so-called “level playing field”, and governance.
What is known as the level playing field relates to a set of shared rules and standards to ensure businesses in one country do not have an unfair advantage over their competitors in others.
Brussels wants the UK to adhere to EU rules on issues like workers’ rights, environmental regulations and state aid, but the UK says the goal of Brexit is to break free from following common rules and reassert national sovereignty.
Border checks and taxes will be introduced for goods travelling between the UK and the EU if a trade deal is not reached and ratified by the end of the year.
The British Chambers of Commerce has warned traders are unprepared for changes that will come when the Brexit transition period – under which the UK remains in the European single market and customs union – ends in 24 days’ time.
Deal or no deal? ‘It’s 50-50’
Irish Taoiseach Micheál Martin described negotiations as being on a “knife edge” and said he hoped “common sense prevails” to allow a trade deal to be struck.
“My gut instinct is that it is 50-50 right now. I don’t think one can be overly optimistic about a resolution emerging,” he told Ireland’s RTE broadcaster.
Foreign Office Minister James Cleverly told BBC Breakfast the UK would keep negotiating “for as long as we have available time or until we get an agreement”.
Talks with the EU “often go to the last minute of the last day”, he added, saying there was “still time”.
If the EU and UK agree a deal, it will have to be turned into legal text and translated into all EU languages, then ratified by the European Parliament before 31 December.
The UK government is likely to introduce legislation implementing parts of any deal reached, which MPs will be able to vote on.
The 27 EU national parliaments may also need to ratify an agreement, depending on the contents of the deal.
Brexit – The basics
- Brexit happened but rules didn’t change at once: The UK left the European Union on 31 January but leaders needed time to negotiate a deal for life afterwards – they got 11 months
- Talks are on again: The UK and the EU have until 31 December to agree a trade deal as well as other things, such as fishing rights
- If there is no deal: Border checks and taxes will be introduced for goods travelling between the UK and the EU. But deal or no deal, we will still see changes
Big week ahead
Later on Monday, the UK Internal Market Bill will return to the House of Commons.
Certain clauses could allow the government to break international law, by overriding elements of its original Brexit treaty with the EU, known as the withdrawal agreement.
The EU is unhappy with those clauses, as is the House of Lords, which voted to scrap them.
But the government is still backing its measures – which could cause tensions in the trade talks – and is expected to push them through the Commons on Monday evening.
The Taxation (Post-Transition Period) Bill, which contains more powers to break the legal requirements of the withdrawal agreement, will also return to the Commons this week.
And on Thursday, EU leaders will meet in Brussels for a two-day summit where they could sign off a deal, if the two sides can reach an agreement by then.