UK and EU negotiators will continue their talks later on a post-Brexit trade deal – but both sides are warning that major obstacles remain.
Boris Johnson spoke to EU Commission head Ursula von der Leyen on Thursday.
The prime minister said discussions are in a “serious situation” and a no deal scenario was “very likely” unless the EU position changed “substantially”.
Mrs von der Leyen said bridging “big differences”, particularly on fishing rights, would be “very challenging”.
However, she also welcomed “substantial progress on many issues”.
The UK has been in a transition period since leaving the EU on 31 January, where it has been following the bloc’s trading rules.
That arrangement will end on 31 December and Mr Johnson acknowledged that “time was short”.
And the UK’s chief negotiator, Lord Frost, tweeted: “The situation in our talks with the EU is very serious tonight. Progress seems blocked and time is running out.”
The talks taking place in Brussels between Lord Frost and his EU counterpart Michel Barnier are aimed at breaking the deadlock on key issues that remain unresolved.
These include fishing, state subsidies, the level playing field – common rules and standards that prevent companies from gaining an unfair competitive advantage – and the legal enforcement of any deal.
BBC political correspondent Chris Mason said the UK does not like a suggestion from the EU that support that comes from Brussels, rather than a member state, should be exempt from any limits on state aid.
In a statement issued after the phone call, Downing Street reported the prime minister said “we were making every effort to accommodate reasonable EU requests on the level playing field, but even though the gap had narrowed some fundamental areas remained difficult”.
“On fisheries he stressed that the UK could not accept a situation where it was the only sovereign country in the world not to be able to control access to its own waters for an extended period and to be faced with fisheries quotas which hugely disadvantaged its own industry.
“The EU’s position in this area was simply not reasonable and if there was to be an agreement it needed to shift significantly.”