Brexit negotiators have been given four days to reach an agreement following crunch talks between Boris Johnson and Ursula von der Leyen.
The prime minister and European Commission president agreed that a “firm decision” about the future of the negotiations should be made by Sunday.
Discussions will continue between the UK and EU’s negotiating teams over the next few days in a bid to resolve the remaining issues.
But in a statement following a three-hour long dinner in Brussels, a senior Number 10 source said it was “unclear” whether the differences between the two sides could be bridged.
They said: “The PM and VDL had a frank discussion about the significant obstacles which remain in the negotiations.
“Very large gaps remain between the two sides and it is still unclear whether these can be bridged.
“The PM and VDL agreed to further discussions over the next few days between their negotiating teams.
“The PM does not want to leave any route to a possible deal untested. The PM and VDL agreed that by Sunday a firm decision should be taken about the future of the talks.”
Von der Leyen said the negotiating teams should “immediately reconvene” to try to resolve the “essential issues” but stressed that the positions remained “far apart”.
She said in a statement: “We had a lively and interesting discussion on the state of play across the list of outstanding issues.
“We gained a clear understanding of each other’s positions. They remain far apart.
“We agreed that the teams should immediately reconvene to try to resolve these essential issues. We will come to a decision by the end of the weekend.”
It was hoped that progress at a political level between Johnson and Von der Leyen could pave the way for more talks between the chief negotiators Lord Frost and Michel Barnier.
But the statements from both sides suggested that while further discussions would be held, substantial movement on the key issues had not been made.
Foreign secretary Dominic Raab told the BBC: “It’s fair to say that whilst there was a good conversation last night, and it was frank and it was candid, the significant points of difference remain.
“I don’t think we can keep going on at that pace without having some progress and some flexibility.
“Particularly from the UK side, we look at the differences on fairly key points of principle – fairly narrow in scope, we are talking about fisheries, level playing field commitments, the EU’s attempt to lock us in to their rules – we need to see substantial movement.”
He suggested talks could continue if it was only a matter of final details but the Sunday deadline should “help focus the minds” of negotiators on both sides.