The second round of the Brexit talks have failed to produce a breakthrough on key disputes with the UK, the EU’s chief negotiator has said.

Michel Barnier said the British Government was still failing to provide sufficient “convergence” on either the UK’s exit bill or the future rights of citizens.

Mr Barnier said the EU would not give way on its insistence that the rights of citizens should be guaranteed by the European Court of Justice – an apparent red line for the UK.

Warning there was a “fundamental divergence”, he told a Brussels press conference: “Citizens must be able to identify the legal certainty that they need for their day-to-day lives.”

The talks would not move onto future trade – Britain’s priority – until the UK had provided the “clarification needed” on both citizens and the so-called “divorce bill”, he made clear.

Mr Barnier also said the UK must clarify, in the next session, how it intends to maintain the Common Travel Area with the Republic of Ireland after leaving the EU.

Laying bare his frustration that the UK was not accepting its “accounts must be settled,” he added: “As soon as the UK is ready to clarify the nature of its commitments, we will be prepared to discuss this with the British negotiators.”

And, making clear the EU would not give way in the negotiations until the UK accepted its financial obligations, he said: “I know one has to compromise in negotiations but we are not there yet.

“That's the financial settlement, let's be very clear. We want clarity on that because we need to be able work more until we come to areas of compromise.”

Alongside him, David Davis, the Brexit Secretary, sent out a conciliatory message on the exit bill, insisting both the UK and EU “recognise the importance of sorting out responsibilities we have to each other”.

And he denied there was any dispute in the Cabinet over whether crashing out of the EU with no deal in 2019 would be a disaster for Britain.

Today, Trade Secretary Liam Fox argued Britain could “survive” outside the EU with no deal – but Philip Hammond, the Chancellor, has warned it would be a “very, very bad outcome”.

“He is not saying anything different from what the Chancellor said,” Mr Davis said, of Dr Fox’s comments – arguing the Chancellor had also warned a “punishment deal” would be worse.

“Nobody expects a punishment deal – Michel and I are both going for a good deal,” Mr Davis said.

On the talks, Mr Davis struck a more optimistic tone, saying: “Overall I'm encouraged by the progress we have made on understanding each other's positions.”

He insisted the UK had made a “fair and serious offer” on citizens' rights and there were “many concrete areas where we agree, as well as areas where there will be further discussion”.

“We have had robust but constructive talks this week. Clearly there's a lot left to talk about and further work before we can resolve this,” Mr Davis said.

“Ultimately getting to a solution will require flexibility from both sides.”

Keir Starmer, Labour’s Shadow Brexit Secretary, said: “The lack of progress in these negotiations is deeply concerning and does not bode well for the future.”

Warning the talks might not move onto trade in October, as hoped, he added: “That will trigger deep concern for businesses and communities across the U.K, who need much greater certainty and reassurance than they are getting from this Government.”

And the Liberal Democrat Brexit spokesman, Tom Brake, said: “It's now been 113 days since Article 50 was triggered and we have seen almost zero progress on even the most basic issues.