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In a 7pm crunch phone call with EU Commission President Ursula von der Leyen last night, the Prime Minister warned negotiations were in a 'serious situation'.

And he said that it now looked 'very likely' that an agreement would not be reached 'unless the EU position changed substantially'. He added that if a deal could not be struck the UK would leave the EU 'as friends', but trading on Australian-style terms. Meanwhile, Ms von der Leyen said 'substantial progress' had been made on a Brexit deal.

But the EU chief also warned 'big differences' which will be 'very challenging to bridge' still remain, with both sides now set to take negotiations down to the wire. In a statement released on Twitter following the call with Mr Johnson, Ms von der Leyen said: 'We welcomed substantial progress on many issues. Bridging them will be very challenging. The spokesperson that Mr Johnson had said fisheries remained a key area of concern. Mr Johnson said the EU's position was 'simply not reasonable' and needed 'shift significantly' if an agreement is to be reached.

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He said the UK was attempting to accommodate the EU's requests on the other key issue in the negations - the level playing field. UK chief negotiator for Brexit, David Frost, also sounded the alarm. In a tweet, he said: 'The situation in our talks with the EU is very serious tonight. Progress seems blocked and time is running out.

The UK has insisted that it will take back control of its coastal waters from the end of the transition period. But the EU was demanding its fleets maintain previous levels of access - with Emmanuel Macron under particular pressure from the French fishing industry. The two sides are thought to be close to a 'landing zone' that includes a transition period, perhaps of five or seven years.

However, there is no settlement yet. The EU has insisted the UK commits to 'level playing field' provisions, guaranteeing it will not undercut businesses on the continent by rolling out lower environmental standards and regulations. State aid has emerged as a particular issue, especially as coronavirus makes swathes of the economy unviable. But the UK says it must regain sovereign powers to decide on rules, even though it has no plans to lower standards or warp competition by subsidising the private sector. It appeared this area was close to resolution before France reportedly laid down a series of extra conditions including huge punishments in the form of tariffs for breaking the rules.

Although the UK is happy with 'non-regression' - meaning current standards are accepted as a baseline - it has dismissed demands to obey rules made by the bloc in future. The enforcement of any deal, and who decides whether rules are broken, has been one of the flashpoints from the start. But Brussels has been pushing to keep control of the governance, as well as insisting on tough fines and punitive tariffs for breaches. The governance issue is heavily linked to that of the 'level playing field' with a breakthrough on the latter likely to pave the way for a breakthrough on the former.

Yesterday, Michael Gove had warned the chances of the UK and the EU agreeing a trade accord by Sunday - the EU's self-imposed deadline for a deal to be reached - were 'less than 50 per cent'. The Minister for the Cabinet Office told MPs on the Brexit Select Committee that currently 'the chances are more likely that we won't secure an agreement'.

Meanwhile, European Parliament chiefs yesterday set a deadline of this weekend for an agreement to be in place. They warned that if a deal was to be finalised past that point it would not allow enough time for MEPs to properly scrutinise and then vote for it before the end of the 'standstill' transition period on December The demand for a deal to be done by the end of Sunday will pile the pressure on negotiators as they try to break the deadlock on crunch issues.

Michel Barnier, the EU's chief negotiator, raised hopes of an agreement being in sight yesterday as he said 'good progress' had been made as talks enter the 'final stretch'. But he also warned the 'last stumbling blocks remain' and Brussels 'will only sign a deal protecting EU interests and principles'. The Chancellor said the huge bailout will now continue until the end of April to give businesses 'certainty', while firms will be able to access emergency loans until the end of March. He also confirmed that the Budget will take place on March 3 as he sets out out the 'next phase' of the Government's Covid recovery plan.

The announcement came amid mounting fury after Matt Hancock announced the results of the Government's first formal review of its tier system of restrictions. Meanwhile, Downing Street yesterday refused to rule out a third blanket lockdown and Mr Sunak's furlough announcement is likely to fuel fears that England could be heading for another national shutdown. His decision to extend furlough again from the end of March to the end of April immediately prompted calls for the Chancellor to provide more support for the self-employed.

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The Chancellor said: 'We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we're providing certainty and clarity by extending this support, as well as implementing our Plan for Jobs. Under the furlough scheme the Government will continue to pay 80 per cent of the salary of employees for hours not worked until the end of April. Mr Hancock faced fury yesterday as he plunged numerous more counties into the top tier of draconian coronavirus restrictions from this weekend and refused to budge on Manchester.

The Health Secretary was branded 'ridiculous' as he delivered the grim news for England amid growing fears over a surge in cases. Chancellor Rishi Sunak said the huge coronavirus furlough scheme will now continue until the end of April, while firms will be able to access loans until the end of March. The Treasury estimates costs of a billion pounds a month for every million workers on the furlough scheme.

The Bank of England has said it expects 5. He also dashed hopes that restrictions could be eased on Manchester, the Tees Valley and parts of the Midlands, in what local leaders branded a 'kick in the teeth'. Mr Hancock did announce that Bristol and North Somerset will be moved down to Tier 2 in a rare piece of good news.

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Herefordshire is also being shifted to Tier 1 from midnight on Saturday morning. The new measures mean that approximately 38million people, or 68 per cent of the population in England, will now be subject to the top bracket - including the Queen at Windsor Castle. Ministers met for several hours into the evening as the region struggles to suppress the virus.

Measures to be announced are expected to include the closing of all non-essential retail as well as close-contact services, while the hospitality sector will be confined to takeaway services only. It is understood there will be no changes made to the Christmas bubbling arrangements. In further bad news, the Government has announced that millions of secondary school pupils in England will have their return to classrooms delayed by up to a week in the New Year, with lessons online to resume in order to reduce the risk of spreading the disease.

Mr Hancock told MPs: 'We must be vigilant and keep this virus under control We've come so far, we mustn't blow it now. Mr Hancock said case rates in the south of England were up 46 per cent in the last week while hospital admissions are up by more than a third, adding in the east of England cases are up two thirds and hospital admissions up by nearly half in the last week. He also batted away complaints from low-infection areas of Kent about the blanket status for the county, urging residents to 'behave like they have the virus'.

London, along with parts of Essex and Hertfordshire, have already been upgraded into the harshest level of curbs - which mean pubs and restaurants can only serve takeaway - after seeing sharp rises in infections. Health experts had urged Boris Johnson not to lower Tier 3 areas into Tier 2 but ministers were also warned of growing unrest in cities under the toughest restrictions.

While Tier 2 areas in Oxfordshire, East and West Sussex, Brighton and Hove and Northamptonshire have all seen a rise in infections in the last seven days, cities such as Greater Manchester and Leeds have seen their rates drop. Greater Manchester's night-time tsar Sacha Lord said the decision to keep it at the highest level was a 'kick in the teeth'. Manchester council leader Richard Leese branded it 'unbelievable'. Mr Bridgen had been asking for his area to be decoupled from Leicester, which has much higher infection levels. The Confederation of British Industry CBI said the extension of the furlough scheme would bring 'some much-needed certainty and respite' for businesses.

Rain Newton-Smith, the organisation's chief economist, said: 'In the middle of a tough winter, this will bring some much-needed certainty and respite for businesses.

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But shadow chancellor Anneliese Dodds accused Mr Sunak of 'last-minute decision-making'. She said: 'Once again the Chancellor has waited until the last possible minute to act, leaving businesses in the dark with less than 24 hours before they have to issue redundancy notices.

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The Chancellor said failing to tackle the structural deficit created by the coronavirus turmoil would leave the UK exposed to 'future shocks'. Nearly 38million people are set to be under the highest tier of restrictions in England by the weekend. The government released a narrative explanation of why its decisions were made for each area of the country. Millions of secondary school pupils in England will have their return to school delayed by up to a week after the Christmas holidays amid a Covid crisis in the classroom. Downing Street confirmed that the planned January 4 and 5 restart would now be 'staggered' with the use of online lessons, with full face-to-face learning beginning on January It came as figures showed more than half of schools in England had coronavirus cases during the first two weeks of November's lockdown and those aged have the highest infection rate of any age group.

The move comes just days after Education Secretary Gavin Williamson took legal action against London councils which wanted to close schools early before Christmas. I don't think morally, economically or politically it would be right,' he said. Mr Sunak added: 'Running a structural deficit years into the future, with debt rising? Doner Kebab. Eggs Benedict. Fish Taco. French Toast. Ice Cream. Lamb Shoulder. Pad Thai. Patatas Bravas. Red Curry.

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