The UK wants a post-Brexit trade deal with the EU but not “at any cost”, Boris Johnson has told his cabinet.
Mr Johnson also told his senior ministers that the talks are still “most likely” to end without an agreement, the PM’s spokesman said.
UK-EU officials are trying to agree a trade deal by 31 December, when the UK stops following EU trading rules.
If no deal is reached, the UK and EU would trade under World Trade Organization rules.
This outcome would lead to each side imposing taxes – or tariffs – on imported goods, potentially leading to higher prices.
What happens next with Brexit?
Throughout the negotiations the key obstacles to an agreement have been access to UK fishing waters, how far the UK should be able to depart from EU standards, and how any agreement should be policed.
Talks between the UK and EU resumed after both sides agreed on Sunday there had been sufficient progress for discussions to continue.
The current set of talks are expected to concentrate on the extent to which the UK should be free to diverge from EU rules and regulations – such as employment rights or business subsidies.
The EU is believed to be prepared to accept UK divergence, if safeguards are in place to prevent what the bloc sees as unfair competition.
The UK side has repeatedly insisted it wants the power to set its own rules.
Speaking on Monday, European Commission President Ursula von der Leyen said the UK has “either to play by our rules, because this is a matter of fairness for our companies… or the other choice is there is a price on it, and the price is border and tariffs.”
In Tuesday’s cabinet meeting Mr Johnson said that ending talks on WTO terms, what he described as an Australia-style arrangement, “remained the most likely outcome” but that he was “committed to continuing to negotiate” on remaining areas of disagreement.