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Britain’s chief Brexit negotiator, David Frost, warned progress in trade talks with the European Union has been “blocked and time is running out” as leaders from both sides played down expectations a deal will be reached.

Prime Minister Boris Johnson spoke with European Commission President Ursula von der Leyen on Thursday evening, after which he said the talks were in a “serious situation” and would fail unless the EU softened its stance on fishing, which he described as “not reasonable.”

For her part, von der Leyen warned “big differences” remain, particularly on fishing, and that “bridging them will be very challenging.”

Despite that pessimistic rhetoric, officials in Brussels expressed confidence that a deal could still be struck before next week. Behind the scenes, the talks are progressing, and such negative language is to be expected at this stage, both as a negotiating tactic and to manage expectations at home, they said.

In New York, the pound pared its gain against the dollar to as little as 0.3%, falling below the 1.3560 London low as traders priced in the leaders’ comments.

The talks are zeroing in on what rights EU boats will have to fish in British waters after Brexit. The issue has minimal economic impact — the industry amounts to just 0.1% of U.K. gross domestic product — but is of high political significance.

The other major obstacle to a deal, the level competitive playing field, which for months looked like it could break the negotiations, isn’t completely resolved, but the two sides are much closer, according to officials on both sides.

For some weeks, the U.K. has objected to the EU’s plan to exempt central bloc financing, including its €750 billion ($920 billion) pandemic relief package, from any restrictions on state aid, according to a British official.

Johnson said the U.K. was “making every effort to accommodate reasonable EU requests on the level playing field, but even though the gap had narrowed, some fundamental areas remained difficult.”

Johnson told von der Leyen that the EU’s position on fisheries was “simply not reasonable and if there was to be an agreement it needed to shift significantly,” according to a statement from his office. “The U.K. could not accept a situation where it was the only sovereign country in the world not to be able to control access to its own waters for an extended period.”

The two sides are battling it out over how long a transition period will apply before any new fishing rules and quotas take effect. The U.K. has pushed for three years; the EU wants longer. They are also still arguing over precise quota numbers and how often they should be renegotiated.

On Thursday, the European Parliament added to the pressure by setting officials a Sunday deadline to reach a deal for it to be ratified in time for the end of the Brexit transition period on Dec. 31.

While EU chief negotiator Michel Barnier told members of the European Parliament that a deal was “possible” on Friday, people familiar with the negotiations said they expected the talks to run into the weekend.

In London, Cabinet Office Minister Michael Gove told a House of Lords committee that the negotiations could even continue after Christmas. He said the EU could provisionally apply any agreement, allowing it to delay getting the European Parliament’s approval until 2021.

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