The British government and European Union (EU) failed to reach agreement Sunday on a trade deal to follow Britain’s exit from the bloc in less than three weeks, on January 1, 2021.

As talks floundered and the deadline set on Wednesday by UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen loomed, both agreed to extend negotiations yet again.

The decision was made in an afternoon phone call yesterday between the two after hours of talks over the weekend in Brussels. Johnson and von der Leyen issued a joint statement reading, “Despite the fact that deadlines have been missed over and over we think it is responsible at this point to go the extra mile.” It concluded, “We have accordingly mandated our negotiators to continue the talks and to see whether an agreement can even at this late stage be reached.”

Earlier Sunday, German Chancellor Angela Merkel came out in support of extending talks.

Following his call with the EC president, Johnson reiterated, “I’m afraid we’re still very far apart on some key things, but where there’s life, there’s hope. We’re going to keep talking to see what we can do… The UK certainly won’t be walking away from the talks.”

In the run up to the extension, both sides stepped up their grandstanding to exert maximum pressure. Various reports stated that progress had been made but sticking points remained on Brussels demands that the UK was unable to accept. On Friday, Johnson said it was “very, very likely” that the talks would end in failure and that the UK was continuing preparations for a “no-deal Brexit” trading on World Trade Organisation terms from next month.

While extending the talks, the EU is seeking to ensure that its 27 member states do not offer the UK any concessions that would replicate EU membership benefits. “According to a diplomatic note seen by the Financial Times,” the newspaper reported Saturday, “EU member states were warned by Brussels not to do anything that would ease the consequences of a no-deal end to the Brexit transition period on January 1.”

“One EU official familiar with the discussion said Brussels was under ‘no illusion’ that a no-deal Brexit would be highly unpredictable, reported the FT, adding that the source said, “Everyone understands there are no guarantees the British come back to the table.”

Last Thursday the EU laid out a series of proposals to the UK that would allow, in the event of a no-deal, airlines to continue flying normal routes between the EU and UK and hauliers to continue to cross the English Channel. The FT reported that the “decision not to include the so-called ‘fifth freedom’—allowing intra-EU airfreight movements”—in the proposals offered to Britain, “and to deny ‘cabotage’ rights that would allow British trucks to make drop-offs around Europe were explicitly designed to keep up the pressures, diplomats were told.”

On Saturday, the FT reported, “Although both sides have sounded increasingly pessimistic over the prospects for a deal ahead of the end of Britain’s Brexit transition period on January 1, the talks have narrowed to one main outstanding issue.” Saturday’s negotiations had “centred on trying to accommodate the EU’s demands for a mechanism that would make tariff-free trade dependent on the two sides maintaining a regulatory ‘level playing field.’”

On Sunday, UK Foreign Secretary Dominic Raab attacked the demand saying, “I don’t think we want a nuclear style reaction where tariffs go up, where we’re back in the same soap opera or drama every couple of years just because there’s a particular issue in a particular sector.”

In a move underscoring the heightening of tensions between Europe’s major powers, the UK’s Ministry of Defence said that in preparation for no agreement on fishing rights in the ongoing talks, four 80-metre machine gun-armed Royal Navy vessels had been placed on standby to guard British waters from EU trawlers, mainly from France, from January 1. The Daily Express front page headlined, "Gunships to guard our fish”. The Daily Mail’s read, “We’ll Send In Gunboats,” with the accompanying article reading, “In a dramatic ratcheting-up of No Deal contingency planning, Wildcat and Merlin helicopters are also being placed on standby to help with coastal surveillance. And military personnel have been seconded to the Joint Maritime Security Centre to help deal with any clashes in fishing grounds.”

On Sunday Raab continued the offensive over the fishing issue, telling Sky’s Ridge on Sunday show, “The bottom line is actually if we do leave on WTO terms we'll be an independent coastal state. Of course we're going to enforce our waters around fisheries and whatever else. And of course for the French and others, that will mean—you know, forget those outlandish terms that they were asking of us—their fishing industries would have zero access guaranteed.”

He added, “I think the EU is concerned that actually Britain might do rather well once we leave the EU and is worried about the competitive advantage, even on the normal global rules that apply.”

The hardline pose struck by Johnson led to consternation among senior figures in his Conservative government. Conservative chair of the Commons defence committee, Tobias Ellwood, a former captain in the Royal Green Jackets infantry regiment, declared, “I think these headlines are absolutely irresponsible. We need to be focusing on what is already in the bag—98 percent of the deal is there, there are three or four outstanding issues.”

While Johnson leads a party with a substantial pro-Brexit majority, with many having no qualms about exiting without a deal, those such as Ellwood are supportive of securing a deal with the EU, echoing majority opinion in business and financial circles that this is vital for their strategic interests.

The opposition Labour Party are pledged that if a deal is struck, they will not oppose it in parliament. On Sunday, a party spokesman said, “The Conservatives promised the British people that they had an oven-ready deal and that they would get Brexit done. The government needs to deliver on that promise, get us the deal and allow us to move on as a country.”

The EU’s fears of the dire implications of a hard-Brexit were outlined Sunday by Spain's foreign minister, Arancha Gonzalez, in an interview with Sky News. Failure to reach a trade deal should be avoided “at all costs,” she warned. “No-deal in the current circumstances would be extremely negative for our economies. And if you go by what economists are saying, and there is plenty of literature on that, the UK would suffer even more than the European Union. We both will suffer, more on the UK side, which I think is something we should try to avoid at all costs.”

Later Sunday, both sides let it be known that talks could go right down to the wire. The FT quoted a “senior British official” stating, “We have time on our side to ratify—we can go up until Christmas.”