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European Commission President Ursula von der Leyen speaks at the end of an EU summit at the European Council building in Brussels on Dec. 11, 2020.JOHANNA GERON/AFP/Getty Images

Britain is likely to leave the European Union without a trade deal in just under three weeks’ time, British Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen said on Friday.

Britain quit the EU in January but remains an informal member until Dec. 31 -- the end of a transition period during which the U.K. has remained in the EU single market and customs union.

Both sides say they want to reach agreement on arrangements to cover nearly US$1-trillion in annual trade, but talks are at an impasse. European Commission head von der Leyen told EU leaders that a no-deal was more likely than a deal, an official said.

“It’s looking very, very likely we’ll have to go for a solution that I think will be wonderful for the U.K., we’ll be able to do exactly what we want from January 1, it will obviously be different from what we set out to achieve,” Mr. Johnson told reporters.

“If there’s a big offer, a big change in what they’re saying, then I must say that I’m yet to see it,” Mr. Johnson said.

Mr. Johnson and Ms. von der Leyen have given negotiators until Sunday evening to break the impasse at talks that are deadlocked over fishing rights and EU demands for Britain to face consequences if in the future it diverges from the bloc’s rules.

In the case of a “no deal” on trade, Britain would lose zero-tariff and zero-quota access to the European single market of 450 million consumers overnight.

As European leaders lined up to warn of the failure of talks, investors started to price in the risk of a chaotic finale to the five-year Brexit crisis.

The British pound tumbled, stocks fell and implied volatility surged. The pound fell 0.8 per cent against the U.S. dollar to US$1.3184 before recovering somewhat.

“The probability of a no-deal is higher than of a deal,” an EU official who declined to be identified quoted Ursula von der Leyen, President of the EU’s executive European Commission, as saying during an EU summit in Brussels.

Italian Prime Minister Giuseppe Conte said there were still fundamental issues unresolved in trade talks. “Time is running out and we need to prepare for a hard Brexit,” he said.

A senior European official said EU leaders had rejected a proposal from Mr. Johnson for a Brexit call with German Chancellor Angela Merkel and French President Emmanuel Macron on Monday.

A Brexit without a trade deal would damage the economies of Europe, send shock waves through financial markets, snarl borders and sow chaos through the delicate supply chains which stretch across Europe and beyond.

Some EU diplomats have cast Mr. Johnson’s rhetoric as theatrics intended to wrench out a deal and please his domestic Brexit supporters, and French President Emmanuel Macron said he still hoped a deal could be reached.

Mr. Macron is under pressure from French fishermen not to give ground over their fishing rights. He was asked by a reporter whether the EU proposal for a one-year contingency plan, under which EU fishermen would keep access to Britain’s fishing waters, was akin to “having your cake and eating it.”

“I’m not asking to have my cake and eat it, no. All I want is a cake that’s worth its weight. Because I won’t give up my share of it either,” he said in Brussels.

The Bank of England took steps on Friday to keep banks lending through 2021 as Britain also tackles the COVID-19 pandemic and prepares for any market disruption from a big change in the United Kingdom’s trading relationship with the EU.

Governor Andrew Bailey said the central bank had done all it could to mitigate risks of failing to secure a trade deal, and that it was ready to deal with any disruptions to financial markets.

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