The European Union has warned that “serious divergence” between itself and Britain in Brexit talks risks the possibility of a no deal, following a meeting by the 27 national leaders in Brussels on Friday.

After roughly an hour of discussion, leaders signed off a joint statement pledging to prepare for the possibility of a no-deal situation and highlighting their “concern” at the lack of progress on the Irish border issue.

Speaking ahead of the meeting, Michel Barnier, the European Commission’s chief negotiator, warned: “On Brexit, we have made progress, but huge and serious divergence remains, in particular on Ireland and Northern Ireland.”

Mr Barnier called for “workable and realistic proposals” to be included in a UK government white paper scheduled for release next month. He added that “time is very short” and said UK negotiators should return to Brussels on Monday to intensify talks.

The EU says a deal must be struck before October to stop Britain crashing out of the bloc in March without a transition period – a scenario that would be expected to cause economic chaos.

Theresa May on Thursday night addressed leaders over dinner about Brexit for 10 minutes but her speech was apparently overshadowed by hours of discussions about the EU migration crisis, the main focus of the summit.

Leo Varadkar admits he didn't realise Theresa May had made a speech in Brussels

Asked about Ms May’s dinner speech on Friday morning, Leo Varadkar, the Irish prime minister, looked confused, and said: “There was a speech? Haha.”

There was a speech? Haha Irish PM Leo Varadkar when asked about Theresa May’s Brexit dinner address

The joint statement signed off by the leaders on Friday, which was leaked to The Independent in advance, said coming to a deal “requires further clarity as well as realistic and workable proposals from the UK”.

“The European Council expresses its concern that no substantial progress has yet been achieved on agreeing a backstop solution for Ireland/Northern Ireland,” it read.

“It recalls the commitments undertaken by the UK in this respect in December 2017 and March 2018, and insists on the need for intensified efforts so that the Withdrawal Agreement, including its provisions on transition, can be concluded as soon as possible in order to come into effect on the date of withdrawal.

“It recalls that negotiations can only progress as long as all commitments undertaken so far are respected in full.”

Leo Varadkar criticises government for not planning for Brexit before EU referendum

The motion says that the Council urges “member states, Union institutions and all stakeholders to step up their work on preparedness at all levels and for all outcomes” – diplomatic reference to a “no-deal” scenario.

The main sticking point in talks is how to avoid a hard border in Ireland. The UK has flat-out rejected EU plans to give a special status to Northern Ireland that would effectively keep it in the customs union and single market, and says any deal must apply to the whole UK and be time limited. The EU says UK plans so far are not enough to prevent a hard border from happening.

The UK also wants to time-limit the policy to placate Brexiteers who fear it could be used to keep Britain in the single market indefinitely, but the EU says it would not accept this.

Brexit threatens life on the Irish border: in pictures Show all 15 1 /15 Brexit threatens life on the Irish border: in pictures Brexit threatens life on the Irish border: in pictures An abandoned shop is seen in Mullan, Co Monaghan. The building was home to four families who left during the Troubles. The town was largely abandoned after the hard border was put in place during the conflict. Mullan has seen some regeneration in recent years, but faces an uncertain future with Brexit on the horizon Reuters Brexit threatens life on the Irish border: in pictures A defaced ‘Welcome to Northern Ireland’ sign stands on the border in Middletown, Co Armagh Reuters Brexit threatens life on the Irish border: in pictures Mervyn Johnson owns a garage in the border town of Pettigo, which straddles the counties of Donegal and Fermanagh. ‘I’ve been here since 1956, it was a bit of a problem for a few years. My premises has been blown up about six or seven times, we just kept building and starting again,’ Johnson said laughing. ‘We just got used to it [the hard border] really but now that it’s gone, we wouldn't like it back again’ Reuters Brexit threatens life on the Irish border: in pictures Farmer Gordon Crockett’s Coshquin farm straddles both Derry/Londonderry in the North and Donegal in the Republic. ‘At the minute there is no real problem, you can cross the border as free as you want. We could cross it six or eight times a day,’ said Crockett. ‘If there was any sort of obstruction it would slow down our work every day’ Reuters Brexit threatens life on the Irish border: in pictures John Murphy flies the European flag outside his home near the border village of Forkhill, Co Armagh Reuters Brexit threatens life on the Irish border: in pictures Potter Brenda McGinn stands outside her Mullan, Co Monaghan, studio – the former Jas Boylan shoe factory which was the main employer in the area until it shut down due to the Troubles. ‘When I came back, this would have been somewhere you would have driven through and have been quite sad. It was a decrepit looking village,’ said McGinn, whose Busy Bee Ceramics is one of a handful of enterprises restoring life to the community. ‘Now this is a revitalised, old hidden village’ Reuters Brexit threatens life on the Irish border: in pictures Union Flag colours painted on kerbstones and bus-stops along the border village of Newbuildings, Co Derry/Londonderry Reuters Brexit threatens life on the Irish border: in pictures Grass reflected in Lattone Lough, which is split by the border between Cavan and Fermanagh, seen from near Ballinacor, Northern Ireland Reuters Brexit threatens life on the Irish border: in pictures Donegalman David McClintock sits in the Border Cafe in the village of Muff, which straddles Donegal and Derry/Londonderry Reuters Brexit threatens life on the Irish border: in pictures An old Irish phone box stands alongside a bus stop in the border town of Glaslough, Co Monaghan Reuters Brexit threatens life on the Irish border: in pictures Billboards are viewed from inside a disused customs hut in Carrickcarnon, Co Down, on the border with Co Louth in the Republic Reuters Brexit threatens life on the Irish border: in pictures Seamus McQuaid takes packages that locals on the Irish side of the border have delivered to his business, McQuaid Auto-Parts, to save money on postal fees, near the Co Fermanagh village of Newtownbutler. ‘I live in the south but the business is in the North,’ said McQaid. "I wholesale into the Republic of Ireland so if there’s duty, I’ll have to set up a company 200 yards up the road to sell to my customers. I’ll have to bring the same product in through Dublin instead of Belfast’ Reuters Brexit threatens life on the Irish border: in pictures A disused Great Northern Railway line and station that was for customs and excise on the border town of Glenfarne, Co Leitrim Reuters Brexit threatens life on the Irish border: in pictures Alice Mullen, from Monaghan in the Republic of Ireland, does her shopping at a former customs post on the border in Middletown, Co Armagh. ‘I’d be very worried if it was a hard border, I remember when people were divided. I would be very afraid of the threat to the peace process, it was a dreadful time to live through. Even to go to mass on a Sunday, you’d have to go through checkpoints. It is terribly stressful,’ said Mullen. ‘All those barricades and boundaries were pulled down. I see it as a huge big exercise of trust and I do believe everyone breathed a sigh of relief’ Reuters Brexit threatens life on the Irish border: in pictures A bus stop and red post box stand in the border town of Jonesborough, Co Armagh Reuters

Theresa May is set to meet with her cabinet at her country retreat, Chequers, next month to hammer out accord among her ministers, who have yet to agree a policy a year and a half after triggering Article 50.

After her dinner, the prime minister said: “On Brexit, I’ve been stressing that we want a deal that’s going to work for the UK and for our European partners and that if we work together we can support each other’s prosperity and security.