Boris Johnson and the EU have set a Sunday deadline for a “firm decision” on the fate of their future-relationship negotiations after three hours of “frank” talks in Brussels ended in deadlock and gloom. A UK government official said that “very large gaps remain between the two sides” following a meeting over dinner in the Belgian capital between the UK prime minister and European Commission president Ursula von der Leyen.

Mr Johnson flew back to London late on Wednesday night, with allies saying that there had not been “much of a glimmer of progress” during talks at the commission headquarters. Ms von der Leyen said after the meeting that the two leaders had “a lively and interesting discussion” and “gained a clear understanding of each other’s positions”, but she acknowledged that “they remain far apart”. “We agreed that the teams should immediately reconvene to try to resolve these essential issues,” she said. “We will come to a decision by the end of the weekend. ”

The encounter was billed by both sides as an attempt to unlock talks with barely three weeks left until Britain leaves the single market, but it ended with the prospect of a no-deal Brexit hanging over the negotiations. Sterling was down 0.7 per cent against the dollar at 1.33 in early Thursday trading in London on the news.

The absence of a joint statement by the two leaders and Mr Johnson’s swift departure from the Berlaymont building after lipm on Wednesday suggested a bruising encounter. A British official said the talks had been “frank” Negotiations are deadlocked over EU demands intended to preserve fair competition for businesses and over the fate of EU fishing rights in UK waters.

On the new Sunday deadline for assessing talks, Dominic Raab, foreign secretary, told the BBC’s Today programme on Thursday: “I think it’s a moment of finality. ”

“We will need a final decision by Sunday on the future of the negotiations.”

Mr Raab said Britain was determined to regain sovereignty over its fisheries and ability to make its own laws. “The EU will need to move significantly on both of those key points because they are points of principle,” he said. However, he added: “We would much prefer a deal, no stone is being left unturned.” The negotiations over the coming days will take place in Brussels, an EU official confirmed.

“It’s hard to see what could happen between now and Sunday to alter the equation,” said one EU diplomat. “It looks  brakes and steering wheel locked.”

Ms von der Leyen will debrief EU leaders on the outcome of the discussions at a summit meeting in Brussels on Thursday. EU ambassadors will also be given an update in the morning.

Ahead of the dinner, Mr Johnson had said in a tweet that the UK would “prosper mightily as an independent nation” irrespective of whether the talks succeeded or failed. Earlier on Wednesday, he set out his red lines to the House of Commons, centred around his familiar themes of sovereignty and regulatory freedom.

Mr Johnson told MPs that the EU wanted to leave Britain as “the only country in the world not to have sovereign control over its own fishing waters”. He also alleged that Brussels wanted to “automatically have the right to punish us and retaliate” if the UK deviated from future EU rules in areas such as labour standards and environmental policy.