Brexit talks at 'moment of truth', Barnier warns

Michel Barnier has warned that trade talks with the UK are at a "moment of truth" with only hours left to secure a deal to prevent potential chaos in the new year.

The EU"s chief Brexit negotiator told the European parliament a trade agreement was possible but that fishing rights and other issues were still holding up talks.

"Very little useful time - some hours - is left to us if this agreement is to take effect on January 1," Barnier said. He said both sides would make "a last attempt" to find a way through.

Lorries are queuing up on both sides of the English Channel and UK ports are struggling to cope with high volumes as businesses prepare for a potential no-deal scenario that would impose tariffs and delays on exporters such as Nissan's factory in Sunderland.

EU negotiators have proposed a multi-stage transition on fishing rights with a review after several years to ease a deal, the Financial Times reported. Barnier said EU fishing boats needed to know their rights in UK waters and that the EU intended to ban UK fish exports if Britain cut off rights.

On maintaining a so-called level playing field for standards and regulations Barnier said the UK had the right to diverge from the EU but that Brussels would retaliate.

"If it wants to diverge in the future, that is [the UK's] right but that can't be without consequence when it comes to having access to our market tariff-free, quota-free," Barnier told MEPs.

The two sides have extended deadlines and warned of cut-off points several times but less than two weeks remain until the end of the trade transition period. Any deal needs to be approved by the European parliament, leaving little leeway with Sunday marked as a final deadline by MEPs.

JP Morgan said despite the gloomy rhetoric the chances of a deal had increased to 70% from 60% and that the difficult issues had become more "narrowly defined".

"The negotiators are well aware of the practical difficulties which failure to reach a deal is already causing," the bank's analysts said. "While this weekend will see another effort to complete the task, it is another deadline which could pass with talks still ongoing."

The pound fell 0.28% to €1.1043 and 0.29% to $1.3545 at 12:50 GMT. The domestic-focused FTSE 250 index fell 0.2% to 20,254 while the FTSE 100, where most sales are outside the UK, rose 0.2% to 6,562.

Josh Mahony, an analyst at IG, said: "With precious little time left to resolve these critical issues, the margin for error has become very thin and traders are recognising that risk as they exit long sterling positions. As we enter a critical weekend of talks it seems that all the focus is on highlighting just how real the threat of no-deal is."

UK prime minister Boris Johnson and Ursula von der Leyen of the European commission spoke on the phone on Thursday evening and agreed that a deal was not imminent. Michael Gove, a UK cabinet minister involved in the process, said on Thursday no deal was the most likely outcome.

"It is not surprising that the final hours - where we are - are concentrated on … the hardest parts," Barnier said.