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Post-Brexit trade talks will continue on Monday after negotiators failed to reach an agreement over the weekend.
The EU's chief Brexit negotiator Michel Barnier and his UK counterpart David Frost met in Brussels on Sunday, but key issues remain unresolved.
The European Parliament said talks needed to have ended on Sunday in order for it to ratify a deal by 31 December.
A UK government source told the BBC a deal will not be reached unless there is a "substantial shift" from Brussels.
It is understood there is likely to be a decision before Christmas on whether or not a deal can be reached.
David McAllister, a German MEP and chairman of the European Parliament's Foreign Affairs Committee, said the European Parliament will not be in a position to grant consent to an agreement this year, as a deal was not reached by midnight on Sunday.
Writing on Twitter, Mr McAllister said: "After intensive negotiations this week, there is still no clarity whether an agreement for the future UK-EU relations will be reached or not."
He said an extraordinary meeting will be convened on Monday morning to discuss next steps.
The UK and the EU have until 31 December to agree a trade deal, plus other points, such as fishing rights.
Mr Barnier said talks were at a "crucial moment", but any agreement must be "balanced and reciprocal".
"We respect the sovereignty of the UK and we expect the same. Both the EU and Britain must have the right to set their own laws and control their own waters. And we should both be able to act when our interests are at stake," Mr Barnier wrote on Twitter on Sunday.
Whitehall sources have said that it is increasingly likely that the UK will emerge from the transition period without a free trade agreement with the EU.
This will mean that, from 1 January, both sides will rely on World Trade Organization (WTO) rules to govern exports and imports.
Tariffs could be introduced on goods being sold and bought, potentially affecting product prices.
A government source told the BBC the EU was "still struggling to get the flexibility needed from member states" to make a deal possible.
"We need to get any deal right and based on terms which respect what the British people voted for."
After months of negotiations, and during this past weekend, the vast majority of the EU-UK trade and security deal has been agreed.
While there remain a number of loose ends, the main focus now in talks is fish.
Prime Minister Boris Johnson promised a return of sovereignty over UK waters after Brexit - and that is what he has been pushing for.
But the EU insists member states' fishing fleets must retain some access, or - it has threatened - there'll be no trade agreement at all.
Both sides say they're committed to trying to reach a deal. But time really is running out now.
Prime Minister Boris Johnson has vowed to continue talks, but warned that gaps still needed to be bridged.
Health Secretary Matt Hancock said a deal was still possible, and in both sides' interests, but the EU needed to give ground.
Any deal reached would need to be agreed by parliaments in the UK and the European Union's member states.
British MPs have now finished for the Christmas break, but Cabinet Office minister Michael Gove said on Thursday they could be called back to ratify a deal in the coming days, were one to be agreed.
The basics
- Brexit happened but rules didn't change at once: The UK left the European Union on 31 January 2020, but leaders needed time to negotiate a deal for life afterwards - they got 11 months.
- Talks are happening: The UK and the EU have until 31 December 2020 to agree a trade deal as well as other things, such as fishing rights.
- If there is no deal: Border checks and taxes will be introduced for goods travelling between the UK and the EU. But deal or no deal, we will still see changes.
What happens next with Brexit?
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