Hansen (European People's Party) spoke during a webinar organised by the Luxembourg Chamber of Commerce as part of their Prepare4Brexit programme.

“There is still a tiny chance that we get the deal over the finish line this year, but time is definitely running out,” said Hansen who is the rapporteur on the trade deal to the European parliament.

Key hurdles are fishing rights and a level playing field of environmental, social and fiscal standards for the UK to do business, as well as state aid rules.

Speaking after a briefing with the EU’s chief Brexit negotiator, Michel Barnier, Hansen said the UK’s agenda was “not very constructive” and that prime minister Boris Johnson was pushing for last-minute concessions from the EU as talks are down to the wire.

Both sides were supposed to reach a deal by 13 December, but Johnson and European Commission president Ursula von der Leyen on Sunday said they would prolong talks.

The European Council, parliament but also legal teams and translators are on standby to get the document passed as soon as possible, Hansen said, adding that the transition period had been too short.

The UK officially left the EU on 31 January 2020, entering a transition period during which both sides wanted to negotiate their future relationship. The UK had refused considering extending the transition period past the end of this year.

If a deal is found at the last minute that cannot be ratified before the year is out because of time constraints, the agreement could be applied provisionally, Hansen explained. Alternatively, the UK could enter a short period of a no-deal scenario for the duration of the ratification process.

If they fail to reach an agreement, the UK and the EU would trade according to World Trade Organisation (WTO) rules, but Hansen said it would be utopian to suggest this system would be preferable to a comprehensive trade deal.

“I don’t see how the UK will be able to sacrifice this. I don’t see how they will be able to afford such a double whammy on their economy,” he said in light of the already-disastrous impact of the coronavirus pandemic.

The UK’s office for budget responsibility in November estimated the economy to shrink 11.3% compared to 2019 and not recover the losses to gross domestic product until the end of 2022. Borrowing is estimated at £394bn for the April 2020 to April 2021 financial year. Before the crisis, the UK government expected to borrow £55bn.

Hansen said the EU had set up a €5bn fund to help regions and sectors most affected by Brexit and, while he acknowledged difficulties for both sides, he said the impact of a no-deal scenario would be a “huge disaster” for the UK.

The MEP also said the UK was pursuing a highly political agenda rather than a business-oriented approach. This comes amid division within the Conservative party over the best way forward.

While Brexit hardliners have been repeating the “no deal is better than a bad deal” mantra, others, such as former business secretary Greg Clark, have said a deal would be important for UK businesses. Any agreement reached by Johnson and the EU will have to be fast-tracked through the UK parliament.