EU leaders will refuse to open talks with the UK on post-Brexit transition at next week’s summit because of the lack of progress on a divorce settlement, dealing a blow to British efforts to break a deadlock in negotiations.

However, the remaining 27 member states will recognise progress made so far by starting internal preparations for future trade talks with Britain, according to a draft summit statement seen by the Financial Times.

The summit conclusions drafted by Donald Tusk, European Council president, will be a serious setback to London, which on Thursday appealed to the EU to offer its chief Brexit negotiator a more flexible mandate.

The one-page statement, which could yet change, will be the main outcome from a critical gathering of EU leaders on Brexit and will set the course for negotiations over the coming months.

Mr Tusk has discussed the approach with all 27 leaders, but some diplomats in Brussels believe the text may still evolve after the summit discussion, particularly on the issue of transition.

The draft outlines the progress made in some areas of talks — particularly with regard to citizen rights — but makes clear that not enough has been done to determine that “sufficient progress” has been made on a divorce settlement.

It suggests EU leaders will “reassess the state of progress” at a summit in December, and if sufficient progress is made, adopt additional guidelines for EU negotiators on a transition and future trade relations with the UK.

In a recognition of the progress made so far, the EU will attempt to be “fully ready for this scenario” by inviting Michel Barnier, its chief negotiator, to “start internal preparatory discussions” on a transition and the future relationship.

The draft circulated to member states came hours after Britain made an appeal to EU leaders to relax their stance on Brexit talks. Mr Barnier, meanwhile, warned that divorce negotiations were so deadlocked that it would take months before trade discussions could begin.

After a fifth round of discussions that ended with no significant advances, Mr Barnier said he would not tell EU leaders at a summit next Thursday that there was “sufficient progress” to move on.

“We have reached a state of deadlock,” Mr Barnier said, emphasising the stalled talks over a financial settlement. “This is very disturbing.” But he said “decisive progress” could be made by December if London showed “political will”.

EU leaders are set to confirm Mr Barnier’s downbeat assessment. The draft conclusions say recent movement by Britain on the bill does not amount to a “firm and concrete commitment” by the UK to settle all of its outstanding financial obligations.

Theresa May, the UK prime minister, had hoped that a speech she gave last month in Florence, in which she signalled that Britain would pay €20bn into the EU budget after Brexit, would clear the way to a speedy deal on this point.

The draft statement is more positive on the issue of citizens rights, saying further negotiations should build on “the convergence achieved”.

On the other main divorce issue, the Irish border, the draft summit conclusions makes clear that the onus is on Britain to come up with “flexible and imaginative solutions” that avoid hard border controls.It states that “some progress” was made in talks.

David Davis, the UK’s Brexit secretary, made several direct calls for EU leaders to revise Mr Barnier’s mandate to allow him to “explore ways forward”, notably on a transition period.

“To provide certainty we must talk about the future,” he said. “Clearly we would like them to give Michel the means to broaden the negotiation.”

His appeal raised the stakes before next week’s leaders’ gathering. London is betting it can persuade Germany and France to ease their strict approach to barring discussions about the future relationship or a transition until divorce issues are settled.

Several EU diplomats warned the UK tactic could easily backfire. “This was not wise,” said one.

Mr Barnier has privately expressed his openness to using informal transition talks to create space for a divorce deal, with the UK settling its bills in conjunction with the EU offering guarantees on a status quo transition after 2019.

But the option of exploratory transition talks was rejected by Berlin and Paris. Instead the union is preparing to approve internal “scoping” work between the 27, to prepare detailed positions on transition and possibly on a future trade deal ahead of negotiations on such issues with the UK.

Some member states, including Ireland, the Netherlands, Sweden and the Czech Republic, are more sympathetic to beginning transition talks but would not want to break EU27 unity. Diplomats said it made for an unpredictable summit discussion.

While some diplomats involved in preparations believe Angela Merkel, the German chancellor, will hold firm, others suspect the hardball tactics may be a way to lower expectations before a summit that could involve more movement.

British negotiators are frustrated that the EU has in effect “banked” the concessions made by Mrs May in Florence last month. London is particularly upset that the EU is in effect calling for a second big set of concessions to close a deal — which may be impossible, given political constraints in Westminster.

The EU in turn wants Britain to clarify the ambiguities in Mrs May’s speech, particularly over its financial commitments.

The stalled negotiations were held amid a darkening mood in Westminster and Brussels, with growing concern the two sides may be headed for a hostile parting, particularly if a deal is not possible by December.

Additional reporting by Roger Blitz in London

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