LONDON — Britain and the European Union passed another do-or-die moment in their trade negotiations on Sunday with neither a breakthrough nor a breakdown. But as the talks stretched on, there were distinct glimmers of hope that the two sides might at last find a way to bridge the gulf between them.
Prime Minister Boris Johnson and the president of the European Commission, Ursula von der Leyen, agreed to extend the negotiations after what both described as a “useful” midday phone call. She dropped her previous admonition that Britain and the European Union were far apart on key issues.
Mr. Johnson struck a warier tone, noting that the gaps remained significant and that Britain should prepare for a failure to reach a deal by the Dec. 31 deadline. But even he said that British negotiators would not walk away from the talks and reaffirmed, “there is a deal to be done, if our partners want to do it.”
Tellingly, neither set a fresh deadline for the negotiations, though as a practical matter, the two sides have only until New Year’s Eve, which is when the transition period to hammer out a long-term trade agreement expires. After that, Britain and the European Union would begin levying tariffs on each other’s goods.
Mujtaba Rahman, an analyst at the political risk consultancy Eurasia Group, said, “Today was the moment where it all could have gone wrong — and it didn’t go wrong.”
“Both sides have committed to avoiding a cliff edge, which means the likelihood of an agreement has now risen substantially,” he added.
At the heart of the talks is the thorny question of how the European Union would respond if Britain diverged from the bloc in its industrial policy. Both sides initially staked out a hard line: Brussels insisting it had to be able to defend the single market from unfair competition from British companies getting state support; and the British declaring it was a matter of sovereignty to be free to chart their own course.
In recent days, however, the European Union has softened its stance, according to people briefed on the talks who requested anonymity to speak about behind-the-scenes negotiations. Rather than automatically impose tariffs to counteract British divergence, the two sides are negotiating other ways to resolve disputes over state aid and other competition policies.
That could allow Mr. Johnson to claim a victory, which would help him sell a trade agreement to the Brexiteers in his Conservative Party. But Britain has given ground in important respects as well.
On Wednesday in Parliament, before he traveled to Brussels for a dinner meeting with Ms. von der Leyen, Mr. Johnson dismissed the European Union’s position as an unacceptable infringement of British sovereignty.
Brussels, he said, wanted to ensure that “if they pass a new law in the future with which we in this country do not comply or do not follow suit, they should have the automatic right to punish us and to retaliate.”
Mr. Johnson’s use of the word “automatic” was noteworthy because it suggested there were other ways the two sides could resolve such disputes. Before that, British negotiators had refused to accept any other safeguards against future divergence except those in standard trade agreements, though they did commit not to water down existing rules on labor and environmental standards.
“It seems as if the U.K. has conceded the principle,” said David Henig, director of the U.K. Trade Policy Project at the European Center for International Political Economy, a research institute. “There is a difference between having a difference on a point of principle and trying to find a practical solution that satisfies both sides.”
There were other more subtle signals of progress. Ms. von der Leyen delivered her statement after speaking to Mr. Johnson in English, saying, “We both think that it is responsible at this point in time to go the extra mile.” A week ago, after a less hopeful phone call with him, she spoke in French and German.
None of this means the talks could not still run aground. Time is short, the two sides still need to work out a politically fraught deal on fishing quotas, and negative blowback from pro-Brexit Conservative lawmakers could yet persuade Mr. Johnson to pull back from endorsing the difficult details.
“If Ursula is optimistic, then that’s great,” Mr. Johnson said to Sky News. “But as far as I can see, there are some serious and very, very, very difficult issues that currently separate the U.K. from the E.U.”
Britain, he said, had made extensive preparations for a failure in the talks, after which its trade with the European Union would default to World Trade Organization terms. Some analysts dismissed that as a calculated effort to take a tough posture before the inevitable compromises to come.
Mr. Henig, the analyst, said the prime minister was under intense pressure from British business not to risk a trade war in January over Britain’s theoretical right to take measures for which it currently has no plans.
That point was underscored on Sunday when Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders, appealed to the negotiators “to finish the job and agree the deal we all so desperately need, without further delay.”
“‘No deal,’” he said, “would be nothing less than catastrophic for the automotive sector, its workers and their families and represent a stunning failure of statecraft.”
The implications of a failed negotiation have become clear in other ways. Mr. Johnson made plans in recent days to deploy four Royal Navy ships to prevent French and other foreign vessels from sailing into British fishing waters.
The prospect of a military confrontation between British and French forces on the high seas provoked alarm and fierce criticism in Britain, even among members of the Conservative Party establishment.
“This isn’t Elizabethan times anymore; this is global Britain,” Tobias Ellwood, chairman of the defense committee in the House of Commons, said to the BBC. “We need to be raising the bar much higher than this.”
Chris Patten, a former chairman of the Conservative Party and governor of Hong Kong from 1992 to 1997, accused Mr. Johnson of being on a “runaway train of English exceptionalism.” The prime minister, he added, was “not a Conservative,” in the sense of being committed to alliances, institutions or the rule of law, but an “English nationalist.”
Mr. Johnson, for his part, said he was eager to negotiate directly with Europe’s two most powerful leaders, Chancellor Angela Merkel of Germany and President Emmanuel Macron of France. But both have refused to engage with him, leaving Ms. von der Leyen and her chief negotiator, Michel Barnier, in control of the talks.
That has denied Mr. Johnson the opportunity to exploit divisions between the 27 members of the European Union. It has revealed, diplomats say, Britain’s misconception that it could force Brussels to back down in the final days of the negotiation.
“What the U.K. never understood is that the European Union is a political project,” said Kim Darroch, who served as Britain’s permanent representative to the European Union and, later, as ambassador to Washington. “They are going to make decisions based on political, not economic, considerations.”