BRUSSELS/LONDON - Brexit trade talks are in the difficult phase and a deal can only be struck if the European Union (EU) accepts that Britain is a sovereign nation, a British minister said on Friday after London indicated that the chance of a breakthrough was receding.

With less than four weeks left until the United Kingdom finally exits the EU's orbit on Dec 31, both sides are calling on the other to compromise over fishing, state aid and how to resolve any future disputes.

The two sides talked into late on Thursday to try to secure a deal, with an EU official saying an agreement was closer than ever but a UK government source warning chances for a breakthrough were receding.

At the eleventh hour, the EU is bringing new elements into the negotiation. A breakthrough is still possible in the next few days but that prospect is receding.

British government

"We are at a critical phase," Business Secretary Alok Sharma told Sky TV on Friday. "It is fair to say that we are in a difficult phase, there are some tricky issues still to be resolved."

"Right from the start of this process, we've always said that a deal can only be done if the EU recognizes that the UK is a sovereign independent nation," Sharma said. "It is on the basis of that a deal will be done."

In Brussels, European Council President Charles Michel stressed that any agreement that may emerge between negotiators must still be approved by the 27 member states.

Michel said the next few days will show what comes next and the 27 leaders meeting remotely on Dec 10-11 will take a position on the latest developments.

"We want a deal but not at any price," Michel said. "For the European Union ... the 'level playing field' is key."

French European Affairs Minister Clement Beaune said that if a good deal coud not be reached, then France would veto it.

We want a deal but not at any price. For the European Union ... the 'level playing field' is key.

Charles Michel, European Council president

EU Brexit negotiator Michel Barnier is due to update 27 national envoys to the bloc's hub later in the day on the latest in the talks. 

ALSO READ: Brexit negotiators racing to strike a deal by end of the week

A member of Barnier's team said on Thursday that significant gaps remained on the three most contentious issues and that the final outcome was still uncertain.

"The long and the short story is that talks are continuing in London. Significant divergences remain," Stefaan de Rynck said at a seminar in the Belgian capital. "Both sides are working hard to overcome them but the outcome is uncertain."

He likened the negotiations to a marathon and said the sides were "probably past kilometer 40" of the just over 42-kilometer race.

Late on Thursday, after a day of mostly silence, the British government said: "At the eleventh hour, the EU is bringing new elements into the negotiation. A breakthrough is still possible in the next few days but that prospect is receding."

An EU official dismissed that as last-minute rhetoric aimed at winning concessions. While the person agreed an agreement was "closer than ever", they admitted it was still not clear if there would be one at all.

Missed deadlines

EU sources said discussions centered around the so-called level playing field on state aid and fixing future minimum labour and environmental standards, as well as what "effective remedies" each side could take if the other let them slip.

The two are trying to agree rules to govern nearly US$1 trillion in annual trade after Britain leaves the EU's orbit on Dec 31. But the three main sticking points have never really shifted, on agreeing fishing rights in UK waters, ensuring fair competition for companies and ways to solve future disputes.

Failure to secure a deal would clog borders, rattle financial markets and disrupt supply chains as the world tries to cope with the vast economic cost of the COVID-19 pandemic

An EU diplomat who declined to be identified said earlier on Thursday the bloc's negotiators had moved to "within millimeters" of the limits of their negotiating mandate.

"We've reached a point where we are so close to the limits of our mandate that we need a movement on the side of the UK if we want to strike a deal," the envoy said.

After many missed deadlines, there was no guarantee that Barnier and his UK counterpart, David Frost, would resolve those differences and seal a deal, which would still need the approval of the 27 EU states, as well as the European Parliament.

Failure to secure a deal would clog borders, rattle financial markets and disrupt supply chains as the world tries to cope with the vast economic cost of the COVID-19 pandemic.

READ MORE: France floats veto threat over Brexit deal as EU feels strains

In a move that could further undermine the talks, the British government said that, despite EU protests, parliament would press ahead with draft laws next week that would breach London's earlier divorce treaty with the bloc.

The EU objects to the bill because it unpicks the Brexit divorce treaty. The UK chamber is also introducing new legislation next week that is widely expected to contain more provisions that overrule parts of London's January EU withdrawal agreement deal relating to Northern Ireland.

Irish Foreign Minister Simon Coveney said he hoped for a new trade agreement in the next few days.

British Education Secretary Gavin Williamson reported "good progress" but said London would accept only "a deal that is right for Britain, if such a deal is available."

"If such a deal isn't available, then we're not going to sign up to something that is to our detriment," he told Sky.