Boris Johnson says there is a "strong possibility" the UK will fail to strike a post-Brexit trade agreement with the EU.
The prime minister said "now is the time" for businesses and the public to prepare for that outcome, although talks would continue.
He added that negotiations were "not yet there at all".
Time is fast running out to reach a deal before the UK stops following EU trade rules on 31 December.
It comes after Mr Johnson's meeting in Brussels on Wednesday with European Commission President Ursula von der Leyen failed to make a breakthrough.
Weeks of intensive talks between officials have failed to overcome obstacles in key areas including competition rules and fishing rights.
In his first public comments since Wednesday's meeting, Mr Johnson said British negotiators were going to "go the extra mile," and he was prepared to travel to Paris or Berlin for talks if necessary.
But he said the EU wanted to keep the UK "locked" into its legal system, or face punishments such as taxes on imports, which had "made things much more difficult".
He said the EU's proposals would mean that, despite leaving the bloc earlier this year, the UK would be forced to remain a "twin" of the 27-country organisation.
"At the moment, I have to tell you in all candour the treaty is not there yet and that was the strong view of our cabinet," he said.
Brexit - The basics
- Brexit happened but rules didn't change at once: The UK left the European Union on 31 January 2020, but leaders needed time to negotiate a deal for life afterwards - they got 11 months.
- Talks are happening: The UK and the EU have until 31 December 2020 to agree a trade deal as well as other things, such as fishing rights.
- If there is no deal: Border checks and taxes will be introduced for goods travelling between the UK and the EU. But deal or no deal, we will still see changes.
He added that "looking at where we are," it was vital the UK prepares for the "Australian-style option" of not having a free trade deal with the EU.
"There's a strong possibility that we will have a solution much more like Australian relationship with the EU than a Canadian relationship with the EU," he added.
Australia is currently negotiating a free trade with the EU but currently does not have one and largely does business with the EU on World Trade Organization (WTO) rules.
Moving to WTO rules on 31 December could result in tariffs being imposed leading to higher prices for the goods the UK buys and sells from and to the EU, among other changes.
The prime minister said he "tried very hard to make progress" at his dinner with Mrs von der Leyen but the EU was making things "unnecessarily difficult".
Meanwhile, the EU has set out the contingency measures it would take in the event of no trade agreement being reached with the UK.
The plans aim to ensure that UK and EU air and road connections still run after the post-Brexit transition period ends on 31 December.
They also allow the possibility of fishing access to each other's waters for up to a year, or until an agreement is reached.
Talks between the UK's chief negotiator Lord Frost and his EU counterpart Michel Barnier resumed on Thursday are continuing in Brussels.
Earlier Foreign Secretary Dominic Raab said it was "unlikely" the negotiations would be extended beyond Sunday, when the two sides have promised a final decision.
The UK is understood to have offered fresh proposals on Wednesday night but that did not lead to a breakthrough but a senior Downing street source indicated talks could continue beyond Sunday if progress had been made.
Meanwhile, EU leaders are also meeting in the Belgian capital for a two day-summit of their own, although Brexit will not be the main focus of their discussions.
Arriving at the summit, Mrs von der Leyen said the conditions for a trade deal would have to be "fair for our workers and our companies."
"This fine balance of fairness has not been achieved so far," she said, adding that a decision would be taken on Sunday.
https://news.google.com/__i/rss/rd/articles/CBMiL2h0dHBzOi8vd3d3LmJiYy5jby51ay9uZXdzL3VrLXBvbGl0aWNzLTU1MjY2Njc40gEzaHR0cHM6Ly93d3cuYmJjLmNvLnVrL25ld3MvYW1wL3VrLXBvbGl0aWNzLTU1MjY2Njc4?oc=5
2020-12-10 18:40:00Z
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