Michel Barnier has set Boris Johnson a midnight deadline to concede to EU demands and agree to a customs border in the Irish Sea or be left with nothing to take to the Commons.

According to sources, the EU’s chief negotiator told ministers that without a major move there was little prospect of a deal being signed off by leaders at a summit on Thursday, before a special sitting of the UK parliament on Saturday.

Legal text had yet to be tabled by the British negotiators, Barnier told ministers in Luxembourg. He advised the EU capitals he would announce on Wednesday whether negotiations on an agreement would have to continue into next week.

Barnier warned that the starting point for a deal has to be the Northern Ireland-only backstop, keeping it in the EU’s single market for goods and erecting a customs border in the Irish Sea, a proposal previously rejected by Theresa May.

After the meeting, Belgium’s deputy prime minister, Didier Reynders, told reporters: “If we have an agreement tonight it will be possible to go to the [European] council and then again to the British parliament. But it’s not easy, we have some red lines, they are well known by all the partners. I’m hoping it will be possible today to make some progress.”

During a phone call with Johnson on Tuesday, the French president, Emmanuel Macron, acknowledged the momentum towards reaching a deal but raised the possible need for a “technical” Brexit extension beyond 31 October to allow talks to bear fruit.

The EU is insisting the leaders will not negotiate when they meet. “The European council will be a political moment to tell the story, not to make detailed technical negotiations,” said one French official. “It cannot be a catch-up. We do not do things urgently.”

German government officials conceded reaching a deal this week was an ambitious target and agreeing on the technical issues could require another two months of talks.

'One last chance': why Irish border question remains sticking point Read more

The thorny issue of how to avoid a hard border on the island of Ireland continues to dog the negotiations. The UK has accepted that Northern Ireland will remain in the EU’s single market for goods although it is seeking to find a way to time-limit the arrangement through a consent mechanism for Stormont.

Barnier told ministers that the UK had dropped the original Stormont lock idea tabled by the prime minister on 1 October, which would have in effect given the Democratic Unionist party a veto on arrangements for avoiding a hard border coming into force and staying in force. Fresh ideas are being discussed, he said.

The problem of a customs border remained difficult, Barnier told the ministers. Downing Street last week accepted there would not be a border on the island of Ireland but the government has also been seeking a way to avoid one in the Irish Sea on the basis that it would represent an economic dislocation of the country.

The EU has rejected the UK’s proposal of a dual system at Northern Ireland’s ports and airport that would involve tracking goods entering from Great Britain and applying differential treatment depending on their final destination.

Barnier has instead pushed the UK to accept a model closer to a Northern Ireland-only backstop. Under one proposal under discussion, Northern Ireland would not be part of the EU’s customs territory, but the bloc’s full customs code would have to be enforced in the Irish Sea. “Northern Ireland would de jure be in the UK’s customs territory but de facto in the European union’s”, said an EU source.

Ireland’s deputy prime minister, Simon Coveney, said a deal required a “big step forward” from Downing Street. “This is difficult but it is possible”, he added.

The Brexit secretary, Stephen Barclay, who was also in Luxembourg and briefly met Barnier on Tuesday morning, insisted a deal was “still very possible”. “The talks are ongoing”, he said. “We need to give them space to proceed but detailed conversations are under way.”

Speaking before the meeting with ministers, Barnier told reporters: “Our teams are working hard and the work just starts now, today.

“This work has been intense all over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult to be frank, it is still possible this week – reaching an agreement is still possible, obviously any agreement must work for everyone, the whole of the UK and the whole of the EU. Let me add that it is also high time to turn good intentions into a legal text.”

France’s EU minister, Amélie de Montchalin, raised the prospect of a Brexit extension beyond 31 October as she arrived in Luxembourg.

She said: “Time alone is not a solution. However, if a significant political change takes place in the UK then that could potentially justify a discussion on an extension if we were asked for it.

“A significant political change is the prospect of an election, a referendum, something that changes the political dynamic so that the triangle between the government, parliament and the British people could align with each other a bit more. We believe that time alone will not solve the complexity of what is at stake.”

“I’m not quite sure if a deal is close but we are trying to do our utmost best to find such a good deal because a hard Brexit would be a disaster not just for the UK but also for the EU27,” said Germany’s EU affairs minister, Michael Roth.