A joint statement from UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen said on Monday that the conditions for a deal were not yet in place.
"We agreed that the conditions for finalizing an agreement are not there due to the remaining significant differences on three critical issues: level playing field, governance, and fisheries," the statement said.
"We asked our chief negotiators and their teams to prepare an overview of the remaining differences to be discussed in a physical meeting in Brussels in the coming days."
Johnson and von der Leyen were reported to have held talks for at least an hour-and-a-half on Monday before agreeing to take a break. The statement emerged about an hour later.
Wednesday represents an apparent deadline for a deal after EU negotiator Michel Barnier told European Parliament delegates that the cutoff moment to strike a deal will be in two days' time. That would be the eve of the last EU leaders' summit of the year in Brussels, on Thursday and Friday, December 10 and 11.
Johnson and von der Leyen spoke on the phone on Saturday but said that "significant differences" remained following the call. Speed is key, as the new deal must be unanimously backed by the EU's remaining 27 member states and approved by various European parliaments, as well as Britain's. Even if a deal is reached, the chances of formally completing the process before the end of the year, when Britain's transition period is set to expire, already seem slim.
Britain's government said Monday afternoon that it was ready to revoke clauses in Brexit legislation that would allow the UK to breach international law when it comes to customs arrangements in Northern Ireland.
Its statement came in anticipation of the clauses being added back into the bill by the House of Commons, which voted to reinsert the controversial sections of the legislation, known as the Internal Markets Bill.
On Monday evening, the lawmakers voted 357-268 in favor of putting an amendment back into the bill which would override a section of the Brexit divorce deal.
The bill will now go back to the Parliament's unelected chamber, the House of Lords, which had previously voted to remove the sections of the legislation.
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Dublin puts chances of success at 50-50
EU and British negotiatiors are now engaged in a last-ditch bid to hammer out an agreement before the transition period ends at the end of December.
The UK's chief negotiator David Frost traveled to Brussels to meet with his EU counterpart, Michel Barnier.
Read more: France must ratify Brexit deal in English, Barnier tells MEPs
Irish Prime Minister Michael Martin on Sunday said he thought there was only a 50-50 chance of a deal being struck.
The UK formally left the EU's political institutions in January this year, but remains in the bloc's single market and customs union until the end of 2020 — meaning very little has changed in terms of rules on trading or traveling to date.
Should no deal be reached by the New Year deadline, the two sides face tariffs and trade quotas as well as tighter customs controls — likely causing severe economic disruption, particularly for Britain.
rc/msh (AFP, AP, dpa, Reuters)