Post-Brexit trade deal negotiations between the UK and European Union are continuing in Brussels amid reports that progress in the talks could see a deal agreed this week.

The EU’s chief negotiator Michel Barnier is said to have told diplomats the UK had moved towards the bloc’s demands on the level playing field, according to the Daily Telegraph.

It said Mr Barnier told ambassadors the UK accepted a “rebalancing mechanism”, meaning it could face tariffs if it moves too far away from EU rules.

The Guardian reported that European Commission president Ursula von der Leyen said there had been “movement” and talks were “on the very last mile”.

Negotiations between the two sides were extended on Sunday after Boris Johnson and Mrs von der Leyen agreed to continue the process despite major differences remaining.

Mr Barnier updated diplomats from the 27 EU states about the progress before resuming negotiations with his UK counterpart Lord Frost on Monday.

Negotiations will continue in the Belgian capital on Tuesday.

For months the talks have been deadlocked on the issues of fishing rights, the “level playing field” to ensure neither side can unfairly compete with the other on environmental standards, workers’ rights or state subsidies, and the legal mechanisms to govern any deal.

Mr Barnier said the “next few days” are important if a deal is to be in place for January 1.

“It is our responsibility to give the talks every chance of success,” he said.

“Never before has such a comprehensive agreement (trade, energy, fisheries, transport, police and judicial co-operation etc) been negotiated so transparently and in such little time.”

A spokesman for the grouping of EU ambassadors said there is “full support for the resilient and persistent” negotiating team led by Mr Barnier.

The UK’s current trading arrangements with the EU expire at the end of the month, meaning any new deal would have to be in place by January 1.

If not, tariffs and quotas will apply and bureaucracy will increase, causing further damage to an economy already ravaged by coronavirus.

The need for any deal to be approved by Parliament means talks cannot continue until New Year’s Eve, but MPs are braced for the prospect of sitting over the festive period.