Are the Brexit trade talks on the verge of collapse? Michel Barnier says the EU is prepared for all scenarios.

Fears about the future of an EU trade deal after Brexit are growing today after talks between the two sides broke off with a warning from Brussels that it was "prepared for all scenarios".

The bloc's chief negotiator alluded to the fact that the two sides left without an agreement on December 31, after warning that "very serious differences" persist between the two sides.

UK chief negotiator Lord Frost was also optimistic about progress, but said the work would continue to create disagreements over fishing rights and state aid.

He tweeted last night: “Made progress, but I agree with Michel Barnier that there are still big differences on some key issues. We continue to work to find solutions that fully respect the sovereignty of the United Kingdom. & # 39;

UK chief negotiator Lord Frost was also optimistic about progress, but said the work would continue to create disagreements over fishing rights and state aid

However, yesterday evening EU sources told the Telegraph that the UK had not been sufficiently engaged in key areas of the disagreement.

The sticking points remain the same – fishing rights and state aid – and Mr Barnier tweeted: "These are essential prerequisites for an economic partnership."

High-ranking EU diplomats said the intensified Brexit negotiations with the UK in recent days had brought only moderate progress.

One told Reuters that Mr Barnier had given neither a timetable for an agreement nor any assurance that a trade deal between the EU with 27 countries and the UK would be concluded by mid-November.

"He didn't give a schedule and was pretty unsure about a deal," said the diplomat.

It has now been two weeks since formal trade discussions between the two sides resumed after a tense stalemate.

However, disputes over fishing rights after Brexit and the so-called "level playing field" for rules to ensure fair competition still block an agreement.

Meanwhile, the spread of the coronavirus is making talks difficult amid fears that an outbreak of the disease among negotiators could cause the entire process to fail.

The last round of discussions took place in Brussels, where the highest rate of Covid-19 infections is recorded in Europe.

Mr Barnier said last night that talks between the two sides over a rudimentary agreement were still facing too many challenges to reach any result soon.

"At this point there are still too many difficulties on important issues," he told reporters as he briefed the envoys from the 27 member states.

But he insisted that the bloc wasn't ready to give up.

"We are working hard and will continue to work to find solutions," he said.

The two sides are now running out of time to negotiate and implement a trade agreement before the end of the post-Brexit transition period in December.

Ratification of the agreement could take up to six weeks, which means that an agreement is expected to have to be in place by mid-November if it is to be rolled out in early 2021.

The prospect of continuing talks came after Downing Street rejected a legal threat from Brussels over Mr Johnson's plans to tear apart parts of the Brexit divorce deal.

The EU opened a lawsuit against the UK in early October and gave Mr Johnson a month to formally respond.

However, Number 10 confirmed that it hadn't bothered to send a response to the bloc and called on the EU to warn that it would now consider escalating the dispute.

Andrew Bailey, the Governor of the Bank of England, has urged both sides to show “goodwill” in implementing an agreement.

Mr Bailey said: “Any trade deal, and by the way, I very much hope there will be a trade deal, has to be adjusted because we are leaving the customs union and leaving the internal market.

“Let me also say that I hope that any trade deal will be accompanied by a spirit of goodwill.

"The UK government, which I think is sensible, has said it will delay the introduction of many of the measures that will have to be introduced with the new trade regime to allow adjustment."