European Commission president Jean-Claude Juncker has said he is “not very optimistic” that a no-deal Brexit can be avoided.
Speaking the morning after his talks with Theresa May in Brussels, Mr Juncker said UK withdrawal from the EU without a deal would have “terrible economic and social consequences”.
His comments came as Brexit Secretary Steve Barclay and Attorney General Geoffrey Cox visited the Belgian capital for talks with chief EU negotiator Michel Barnier, who was also holding separate discussions with Labour leader Jeremy Corbyn.
Meanwhile, Chancellor Philip Hammond described Brexit as “a large black cloud” hanging over the UK economy, and said a no-deal departure would be “extremely bad” for Britain.
In an interview with BBC One’s Breakfast a day after three Tory MPs resigned from the party over Brexit, the Chancellor was repeatedly asked whether he would quit the Cabinet if Mrs May went for no-deal.
He replied: “I will always do what I believe is in the best interests of the country.”
Asked if a no-deal Brexit would be in the UK’s best interests, Mr Hammond said: “No, definitely not.”
In a joint statement issued after Wednesday’s meeting, the Prime Minister and Mr Juncker acknowledged they were in a race against time to reach a workable deal before the scheduled date of Brexit on March 29.
The statement said the PM and Mr Juncker “will review progress again in the coming days, seized of the tight timescale and the historic significance of setting the EU and the UK on a path to a deep and unique future partnership”.
Speaking to the European Economic and Social Committee in Brussels the following morning, Mr Juncker said he was “recovering” from his talks with Mrs May and had “Brexit fatigue”.
“Brexit is deconstruction, it is not construction. Brexit is the past, it is not the future,” he said.
“If a no-deal would happen – and I can’t exclude this – this would have terrible economic and social consequences, both in Britain and on the continent, and so my efforts orient in a way that the worst can be avoided.
“But I am not very optimistic when it comes to this issue.”
Mr Hammond said that “important steps forward” had been made in Wednesday’s talks, which had seen the European Commission make clear it was ready to “really engage” on finding alternative arrangements in place of the backstop to keep the Irish border open.
But he accepted that it was “extremely uncomfortable” for business to get so close to Brexit day without clarity on the way forward.
“We are not marching to the cliff-edge on no-deal at all,” he said. “We are working flat-out to achieve an outcome with the EU that will allow Parliament to ratify a deal.”
Asked if he would quit in a no-deal scenario, Mr Hammond said: “My job is to make sure that the Government gets us a solution which does not take us to that no-deal precipice.
“So long as I believe I am able to influence that outcome and help to get us to a good outcome here, which will protect British jobs and British prosperity, that’s what I will go on doing.”
Mrs May is eager to get movement on the backstop before the Brexit issue returns to the Commons for a series of votes on February 27, when MPs are expected to mount a bid to delay Brexit beyond March 29.
But Mr Hammond said that her ability to put her deal to another “meaningful vote” ahead of the next Commons showdown will “depend on (the) progress that is made over the next few days”.
The backstop arrangements would see the whole of the UK remain in a customs union with the EU and Northern Ireland following some single market rules until a wider trade deal is agreed, in order to prevent the need for checkpoints on the Irish border.
The Daily Telegraph reported that Mr Cox is drawing up plans for a unilateral exit mechanism from the backstop with a 12-week notice period.
After the Brussels talks, the PM said: “I have underlined the need for us to see legally binding changes to the backstop that ensure that it cannot be indefinite.
“That’s what is required if a deal is to pass the House of Commons.
“We have agreed that work to find a solution will continue at pace.
“Time is of the essence and it is in both our interests that when the UK leaves the EU it does so in an orderly way.
“So, we have made progress.”
The PM and Mr Juncker are due to talk again before the end of the month.
Mrs May will be attending a two-day EU-League of Arab States summit in the Egyptian Red Sea resort of Sharm el Sheikh starting on Sunday.
Around 20 EU leaders are expected to take part, including German chancellor Angela Merkel and Irish premier Leo Varadkar, and Mrs May is expected to hold a series of one-to-one meetings on the margins of the main summit.