British business chiefs have reacted with concern at the uncertainty over the current state of negotiations, pointing to a lack of clarity over tariffs, potentially higher food prices and the prospect of “significant job losses”.
Leaders have also called for a “grace period” and time for firms to adjust to either outcome in the new year.
Prime Minister Boris Johnson suggested there was still hope of a post-Brexit trade deal with the European Union but the two sides remained “very far apart”.
Following talks between the Prime Minister and European Commission president Ursula von der Leyen, the negotiations will continue, with both leaders agreeing to “go the extra mile” in search of a deal.
Mr Johnson said the UK would not be walking away from the negotiating table and “where there is life, there is hope” but a no-deal outcome was still the most likely scenario.
He said the UK should get ready for the breakdown of talks, resulting in tariffs under World Trade Organisation (WTO) terms from January 1.
“The most likely thing now is, of course, that we have to get ready for WTO terms, Australia terms,” the Prime Minister said.
But the agreement to continue talking beyond the Sunday deadline set by Mr Johnson and Mrs von der Leyen does indicate that some compromise is possible.
The Confederation of British Industry (CBI), which represents 190,000 businesses, said a deal was both “essential and possible”.
CBI director-general Tony Danker said: “The news that talks will continue gives hope. Ongoing delays are frustrating and cost businesses. But it is vital to make use of the time.
“Government must move with even more determination to avoid the looming cliff edge of January 1.”
Meanwhile, British Chambers of Commerce (BCC) director general Adam Marshall said it was a “frustrating time” for businesses which are “anxiously waiting” to get clarity on trade agreements.
He added: “Businesses will need time and support to adjust in a new year like no other – whatever the eventual outcome.”
The public have also been urged to avoid panic-buying in the event of no deal by the British Retail Consortium, which warned the public will “pay the price” of a failure to “agree a zero-tariff agreement”.
The trade association also said “new checks and red tape” could make doing business more onerous, adding firms have been “building new customs and VAT processes and working with suppliers to ease logistics” in preparation for a no-deal outcome.
The basic fact of what tariffs will apply to which goods leaving or coming into the country, and thus their price, also remains unknown, said BCC president Baroness Ruby McGregor-Smith.
She told Sky News the UK needs a deal “as soon as possible”, adding: “We need to understand how we are going to trade and what the rules are.”
“I think it’s very difficult to be ready because there are a number of areas where we don’t have any detail at all,” she said.
She added that there “could be some significant job losses”, compounded by a “lack of Government support after March as we come out of the pandemic”.
Elsewhere, campaign group London First, which aims to make the capital the “best city in the world” in which to do business, said: “The UK and the EU need to urgently thrash out a deal to avoid a chaotic, disruptive and economically damaging New Year.”
Its chief executive, Jasmine Whitbread, said: “Continuing talks is the right decision. Businesses are deeply concerned at the prospect of a no-deal Brexit on top of dealing with the fallout from Covid.”