Brussels is prepared to “intensify” trade talks, European Union negotiator Michel Barnier said as the UK declared the process over unless there was a fundamental change in the bloc’s position.
Cabinet Office Minister Michael Gove said further talks would be “meaningless” without a shift in the EU’s stance.
But Mr Barnier, who discussed the crisis with counterpart Lord Frost, said the EU was prepared to continue talks across all subjects in the negotiations.
Crucially, he indicated the EU was prepared to discuss “legal texts” for a deal, something the UK has been pushing for.
In the Commons, Mr Gove said it was “almost incredible” that the EU had so far refused to discuss legal texts so far.
Relations between London and Brussels broke down last week after a European Council summit failed to provide a breakthrough on a deal and watered-down commitments to round-the-clock negotiations.
Mr Gove told MPs: “The conclusions of that council reaffirmed the EU’s original negotiating mandate, they dropped a reference to intensive talks that has been in the draft and they declared that all, all future moves in this negotiation had to be made by the UK.”
He added: “There’s no point in negotiations proceeding as long as the EU sticks with this position.
“Such talks would be meaningless and would take us no nearer to finding a workable solution.”
Responding to Mr Barnier’s comments, Mr Gove said it was “a reflection of the strength and resolution (of) our Prime Minister” and a sign that the Government’s “firmness” with the EU is “now bearing fruit”.
Mr Gove again said the UK’s door was “ajar” if the EU changed position and acknowledged that leaving the transition period without a trade deal could cause some difficulties.
“We recognise that there will be some turbulence, but we’ve not come so far to falter now when we are so close to reclaiming our sovereignty.”
Downing Street stressed that if no deal is in place by the end of the year, when the current transition arrangements end, the UK will not return to the negotiating table in 2021.
The Prime Minister’s official spokesman said: “If the EU change their position then we will be willing to talk to them.
“But they must be ready to discuss the detailed legal text of a treaty in all areas.”
EU leaders must also be committed to a resolution that “respects UK sovereignty and independence”.
“If not, we will end the transition period on Australian terms,” the spokesman said.
Business Secretary Alok Sharma has admitted that the difference between a no-trade deal outcome and “Australian terms” is a ” question of semantics”.
He told LBC: “The Australia deal is the deal that you have with countries where you are predominantly working on a WTO (World Trade Organisation) basis.”
The major stumbling blocks remain access for EU boats to UK fishing grounds and the “level playing field” to ensure fair competition – including any state subsidies that the Government might seek to give firms.
The developments came as the Government launched a “time is running out” campaign urging businesses to get ready for the end of the transition period on December 31, regardless of whether a trade deal is in place.
Businesses, increasingly concerned about the high tariffs of a no-deal exit, called on both sides to find a compromise for a deal.
Confederation of British Industry deputy director-general Josh Hardie warned of a “hat-trick of unprecedented challenges” from the first wave of coronavirus, its resurgence and “uncertainty over the UK’s trading relationship with the EU”.
Meanwhile, the UK’s five Anglican archbishops intervened to criticise the Government’s controversial new Brexit legislation as setting a “disastrous precedent”, in a letter to the Financial Times ahead of a Lords debate.
Led by Archbishop of Canterbury Justin Welby, they said the UK Internal Market Bill has “enormous moral, as well as political and legal, consequences” by paving the way for a breach of international law by overriding parts of the Withdrawal Agreement with Brussels.
Number 10 urged peers, including Church of England bishops sitting in the Lords, to back the UK Internal Market Bill.
“We consider the Ukim Bill to be vital,” the Prime Minister’s official spokesman said.
“It was passed with the support of the House of Commons and we believe it is a necessary legal safety net to protect the integrity of the UK’s internal market.”