Boris Johnson has called a halt to talks with Brussels on a post-Brexit free trade agreement, warning Britain to prepare for a final no-deal break with the European Union.
In a statement to broadcasters, the Prime Minister accused EU leaders of seeking to impose a series of "unacceptable" demands and called for a "fundamental change of approach" if there was to be any agreement.
The immediate response from European Commission president Ursula von der Leyen was to say that the EU would carry on negotiating, with talks next week in London going ahead as planned.
However, at a briefing for journalists in Westminster, the Prime Minister's official spokesman said the negotiations were now "over".
He said there was "no point" in the EU's chief negotiator Michel Barnier travelling to the UK unless the EU changed its negotiating position.
"The trade talks are over. The EU have effectively ended them by saying that they do not want to change their negotiating position," the spokesman said.
"There is only any point in Michel Barnier coming to London next week if he is prepared to discuss all of the issues on the basis of legal texts in an accelerated way, without the UK being required to make all of the moves.
"Or he is willing to discuss the practicalities of areas such as travel and haulage, which the PM mentioned in his statement. If not, there is no point in coming."
Mr Johnson had previously said that he would walk away from the negotiations if there was no agreement on a deal by the time of this week's EU summit in Brussels.
🇪🇺-🇬🇧 talks: the EU continues to work for a deal, but not at any price.
As planned, our negotiation team will go to London next week to intensify these negotiations.
— Ursula von der Leyen (@vonderleyen) October 16, 2020
In his broadcast statement, the Prime Minister said it was clear from the gathering in the Belgian capital the EU was not prepared to offer Britain the kind of Canada-style free trade agreement it was seeking.
He said businesses and individuals should now start preparing to start trading with the EU on World Trade Organisation (WTO) rules like Australia when the current Brexit transition period ends at the end of the year.
"From the outset, we were totally clear that we wanted nothing more complicated than a Canada-style relationship, based on friendship and free trade," he said.
"To judge by the latest EU summit in Brussels, that won't work for our EU partners. They want the continued ability to control our legislative freedom, our fisheries, in a way that is obviously unacceptable to an independent country.
"Given that they have refused to negotiate seriously for much of the last few months, and given that this summit appears explicitly to rule out a Canada-style deal, I have concluded that we should get ready for January 1 with arrangements that are more like Australia's based on simple principles of global free trade."
After years of negotiations & many hurdles crossed, it's no time to give up. Neither side can afford to fall at the final fence. A deal would protect COVID-hit livelihoods. With tenacity & compromise, a deal is possible.
— Carolyn Fairbairn (@cbicarolyn) October 16, 2020
Mr Johnson said Britain could embrace the prospect of trading on WTO terms – with tariffs on many goods and some quota restrictions – with "high hearts and complete confidence".
However, industry reacted with alarm, warning of the damage to an economy already stricken by coronavirus if there was no deal by the end of the year.
CBI director-general Dame Carolyn Fairbairn said they could not afford to give up on negotiations and called on both sides to exercise "tenacity, common sense and compromise".
"Neither side can afford to fall at the final fence. A deal is the only outcome that protects Covid-hit livelihoods at a time when every job in every country counts," she said.
Society of Motor Manufacturers and Traders chief executive Mike Hawes warned it would have a "devastating impact" on the automotive sector, hitting jobs "in every region of Britain".
New calculations show the catastrophic impact of 'no deal' with WTO tariffs putting production of some 3 million EU and UK built cars and vans at risk over next five years. pic.twitter.com/sCW2OjRC8u
— SMMT (@SMMT) October 16, 2020
Speaking at the end of the summit in Brussels, European Council president Charles Michel said the EU was ready to carry on with negotiations.
"We are ready to negotiate, we are ready to continue the negotiations and I hope it will be possible to make progress in the future," he said.
"We are determined to reach a deal but not at any cost."
The hardening of Britain's position came after EU leaders agreed summit conclusions on Thursday calling on the UK to make "the necessary moves to make an agreement possible" without any suggestion of EU concessions.
The two sides have been at loggerheads for months over the issues of future fishing rights and state aid rules.
German chancellor Angela Merkel has called for compromise on both sides but French president Emmanuel Macron warned he would not allow French fishermen to be "sacrificed" for the sake of a deal.