Reuters reports that Business Secretary Alok Sharma said that Brexit trade talks are in the difficult phase and a deal can only be struck if the European Union accepts that Britain is a sovereign nation.

"We are at a critical phase," Sharma told Sky TV. "It is fair to say that we are in a difficult phase, there are some tricky issues still to be resolved."

"Right from the start of this process, we've always said that a deal can only be done if the EU recognises that the UK is a sovereign independent nation," Sharma said. "It is on the basis of that a deal will be done."

Britain formally left the EU on Jan. 31 but has been in a transition period since then under which rules on trade, travel and business remain unchanged. From the end of the year it will be treated by Brussels as a third country.

If the two sides fail to reach a deal, the five-year Brexit divorce would end in disorder just as Europe grapples with the vast economic cost of the COVID-19 outbreak.

EU Brexit negotiator Michel Barnier is due to update 27 national envoys to the bloc's hub Brussels on Friday on the latest in the talks.