The UK and Canada have suspended trade negotiations, as talks collapsed over disagreements on beef and cheese.

The Canadians had been pushing the Government to relax a ban on hormone-treated beef, a sticking point for negotiators. But the decision to walk away from talks could leave British trading terms with Canada worse off.

The two nations have been negotiating for the last two years after Britain left the European Union, with trade continuing largely under the same deal originally brokered when the UK was a member of the bloc.

A time-limited side agreement had been in place protecting cheese and cars from higher tariffs, but protections for the former had expired at the end of December leaving British producers facing higher duties of 245%.

For our dairy exporters and parts of our manufacturing industry the loss of key trade preferences puts them in a worse position than before 2020

British car firms could see higher tariffs from April on exports, when an agreement is due to expire.

The breakdown of talks has sparked worries among business groups, while Labour called it “very concerning” and criticised the Government’s handling of post-Brexit trade negotiations.

Downing Street on Friday said the Government remained open to restarting talks, but only if terms were favourable.

“We will only negotiate deals that deliver for the British people, and that we reserve the right to pause negotiations where progress is not being made. We’re open to restarting talks with Canada in the future,” a spokeswoman for the Prime Minister said.

She said that the benefit of leaving the EU was that the UK was “able to insist on the detail of each and every deal to ensure that it works specifically in the UK’s interests”.

But the British Chambers of Commerce said the suspension of talks was “unwelcome news”.

William Bain, its trade policy head, said: “For our dairy exporters and parts of our manufacturing industry the loss of key trade preferences puts them in a worse position than before 2020.

“Government must help these sectors through difficult times and open up new markets for our goods and services.”

Rather than strengthening our trading position post-Brexit these failures have left us in a weaker position, particularly for the automotive sector

Mike Hawes, the chief executive of automotive body SMMT, said it was “especially disappointing and sends a signal that the UK’s world-class automotive products are not welcome in Canada”.

“If UK car exports can’t use EU parts and components to avoid additional duties it creates a risk that tariffs, potentially charged on top of luxury goods taxes, could be reintroduced. This would benefit no one, not least Canadian consumers, and we urge all parties to get back around the negotiating table,” he said.

Both sides appeared unhappy at the failure to come to an agreement. A UK Government source said Canada appeared to have “lost sight of the bigger picture – the British and Canadian businesses who do £26 billion worth of trade a year and the people they employ”.

The source added: “If Canada come back to table with a serious offer and desire to make progress we’re all ears, but in the meantime we’re going to focus on other trade deals that deliver for UK businesses.”

Canada’s trade minister Mary Ng said the Canadian “government will never agree to a deal that isn’t good for our workers, farmers and businesses”.

Ralph Goodale, Canada’s High Commissioner in the UK, said his country was “disappointed” with the pause.

“Trade is a 2-way street,” he said in a post on social media. “We too have an obligation to ensure deals that benefit OUR people.”

The Government’s stance won the backing of farmers. Minette Batters, president of the Nation Farmers’ Union of England and Wales, praised the Government for having “stuck to its line and not given way”.

She told BBC Radio 4’s Today programme it was essential that hormone-treated beef is not allowed into the country.

“It is a relief for farmers. This has been going on for a long time and it is about enhancing the trading relationship between the UK and Canada.

“Trade on agricultural products is always the first thing to be discussed and the last thing to be agreed. I am pleased the Government has stuck to its line and not given way,” she said.

Ms Batters added: “Canada has played hardball for a long time. It was always going to come to a crunch point as to who was going to capitulate.”

I just hope that they might reflect on briefing out overnight. As I say, I always believe this House should hear it first

Shadow business and trade secretary Jonathan Reynolds said: “This is very concerning news and another significant failure from the Conservatives to honour their promises.

“Rather than strengthening our trading position post-Brexit these failures have left us in a weaker position, particularly for the automotive sector.

“This is another blow to the British economy because of Conservative incompetence. It is clear that they are unable to deliver what we need to get our economy growing.”

Meanwhile, Commons Speaker Sir Lindsay Hoyle said ministers should have made a statement to MPs about the halt in trade talks.

He told the Commons: “I will say it is amazing how quickly the Government come to give good news. I just hope that they might reflect on briefing out overnight. As I say, I always believe this House should hear it first.”