BRUSSELS (Reuters) – Britain and the European Union are close to clinching a Brexit trade deal, diplomats said on Wednesday and, while it could still be days away, it appears that the estranged allies will avoid a turbulent economic rupture on New Year’s Day.

There was no official confirmation from either side that a deal was about to be struck.

A source at the EU’s executive, the Commission, said talks were still under way, though now in their “final stages”, and one EU official urged caution, saying: “It could still go either way.”

A British government source was also cautious, saying: “Negotiations are ongoing.”

However, three diplomatic sources in the bloc told Reuters that member states had started to prepare their procedure to implement any deal from Jan. 1, if one was agreed.

Since formally leaving the EU on Jan. 31, the United Kingdom has been negotiating a free trade deal with the 27-member bloc in an attempt to ease its exit from the EU’s single market and customs union at the end of this year.

An accord would ensure that the goods trade that makes up half of annual EU-UK commerce, worth nearly a trillion dollars in all, remains free of tariffs and quotas.

One senior EU diplomat, who spoke on condition of anonymity, said a provisional application of the deal with effect from Jan. 1 would need to be approved by member states because there was not enough time for the European Parliament to ratify it.

British Housing Secretary Robert Jenrick said two significant issues – fishing and competition – still remained to be resolved, and that there had not been sufficient progress for a deal.

The Commission declined to comment.

Sterling jumped more than 1.1% against the dollar on perceived prospects of a deal while bond yields rose, and prices fell, in Britain, Europe and the United States. [GBP/] [GB/] [GVD/EUR] [FRX/] [US/]

British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen were in close contact and were expected to hold another call on Wednesday.

DEAL TIME?

The United Kingdom casts off into the unknown on Dec. 31 after a stormy 48-year liaison with the Franco-German-led project that sought to bind the ruined nations of post-World War Two Europe into a global power.

The scale of potential Brexit disruption has been laid bare since France closed its borders to Britain for 48 hours citing a new coronavirus variant, stranding thousands of furious European truckers in southern England and disrupting food supplies.

Irish Prime Minister Micheál Martin said the gap on one of the most emotive issues – how much fish EU boats could catch in British waters – was still wide.

But he told the national broadcaster RTE: “I think, given the progress that has been made, that there should be a deal … A ‘no-deal’ would be an appalling shock to the economic system on top of COVID-19.”

Ultimately, Johnson, who is grappling with both an accelerating COVID-19 epidemic and a border crisis at Dover, Europe’s busiest truck port, will have to decide if the narrow deal on offer is worth signing up to.

Walking away might elicit applause from many Brexit supporters at home but would trigger severe trade disruption and generate still more acrimony for the mountain of talks on bilateral relations that still lie ahead.

“There’s still the same serious areas of disagreement, whether that’s on fisheries or the level playing field,” Jenrick told Sky News. “But at the moment there isn’t sufficient progress.”

The “level playing field” is trade jargon for ensuring fair competition. EU leaders have long feared that after Brexit, the United Kingdom could ease regulation to undercut competitors and thus gouge EU market share. Enforcement is a key issue.

The two sides are also haggling over just how much EU fishing boats can catch in Britain’s waters: essentially how many sole, sand eels and mackerel boats from EU member states can haul in per year, and when and how to renew such agreements.