Large gaps remain between the UK and European Union in reaching a Brexit deal, Downing Street has said 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.”

Mrs 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 Mr Johnson and Mrs 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.

Mr Johnson arrived at The Berlaymont building in Brussels at around 7pm UK time on Wednesday for discussions over dinner, at which fish featured heavily on the menu.

Negotiations have faltered on the issues of fishing rights, the “level playing field” measures aimed at preventing the UK undercutting the EU on standards and state subsidies, and the way that any deal would be governed.

As the two leaders posed for the cameras ahead of the dinner, Mrs von der Leyen told Mr Johnson to keep his distance as they briefly took their face coverings off.

She then told the Prime Minister to put his mask back on, to which Mr Johnson responded: “You run a tight ship here, Ursula, and quite right too.”

Their meeting came ahead of a European Council summit on Thursday where Mrs von der Leyen is expected to debrief the leaders of the 27 member countries on the state of play with the negotiations.

Before leaving London Mr Johnson told MPs that no prime minister could accept the demands the EU is making, though insisted a trade deal was still possible.

Just three weeks remain until the current transitional arrangements expire.

Failure to reach agreement would see tariffs imposed on UK exports to the EU, the country’s biggest trading partner, and could also increase bureaucracy.

The Office for Budget Responsibility has suggested that a no-deal outcome could wipe 2% off gross domestic product, a measure of the size of the economy, in 2021.

The Bank’s governor Andrew Bailey has warned that the long-term damage caused by a no-deal situation would be worse than the economic hit from coronavirus.