UK Prime Minister Boris Johnson said there is a "strong possibility" the UK will fail to strike a post-Brexit trade deal with the EU.
Speaking for the first time since a crunch meeting in Brussels, the Johnson said "now is the time" for firms and people to prepare for a no deal outcome, reports the BBC.
Talks continue between the two sides, but Johnson said they were "not yet there at all" in securing a deal.Time is running out to reach an agreement before the UK stops following EU trade rules on 31 December. Weeks of intensive talks between officials have failed to overcome obstacles in key areas, including competition rules and fishing rights.
Johnson met European Commission President Ursula von der Leyen on Wednesday, but the pair failed to make a breakthrough. He pledged British negotiators, who earlier resumed talks with their EU counterparts in Brussels, would "go the extra mile" to reach a deal.
However, 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".
Boris Johnson added that the EU's proposals would mean, 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.
But Johnson said 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 said.