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Hopes have been raised of averting an impending ‘no deal’ economic break between Britain and the European Union, with only a disagreement over fishing now separating the two sides.

After resolving remaining fair-competition issues, negotiators have on Wednesday been addressing EU fisheries rights in UK waters as they work to secure a deal for a post-Brexit relationship after nine tortuous months of talks.

Two EU sources said the negotiations were in a final phase, with one saying: “I expect to see some white smoke tonight”.

The official asked not to be identified because the talks were still ongoing.

Customs checks and some other barriers will be imposed under whatever circumstances on January 1, but a trade deal would avert the imposition of tariffs and duties that could cost both sides hundreds of thousands of jobs.

Britain withdrew from the EU on January 31, and an economic transition period expires at the end of this year.

Rumours of a pre-Christmas trade deal surfaced in recent days based on progress on the outstanding issues beyond fishing.

However, some EU nations insisted that upon close scrutiny, Britain’s latest proposals on quotas for EU vessels in UK waters were far less conciliatory than first met the eye.

On Wednesday, the brokering on quotas and transition times for EU vessels to continue fishing in UK waters were in full swing, with progress reported from several sides.

“We will need to get those final issues resolved, and there’s some way further to go on that,” UK Cabinet minister Robert Jenrick said.

The EU has long feared that Britain would undercut the bloc’s social, environmental and state aid rules to be able to gain an unfair edge with its exports to the continent.

Britain has said that having to meet EU rules would undercut its sovereignty.

On those issues, a compromise had been reached, a diplomat from an EU country said.

Over the past few days, British Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen have been drawn more and more into the talks seeking to unblock negotiations.