It's again raised fears about the possibility of a no-deal Brexit.
London's goal of agreeing on a full free trade deal with the EU by the end of the year is unrealistic, according to Michel Barnier.
The UK is set to leave the bloc on January 31 but there will be a transition period until December 31 to agree on a future trading relationship.
UK PM Boris Johnson wants a trade deal agreed upon by the end of the year, but Barnier, the EU's chief Brexit negotiator, has cast doubt on this.
``"We cannot expect to agree on every aspect of this new partnership,'' Barnier said on Thursday (January 9), adding ``"we are ready to do our best in the 11 months.''
Johnson's insistence there won't be any more delays has set off alarm bells among businesses, which fear the UK could face a "``no-deal'' Brexit at the start of 2021.
As well as issuing a warning about the time needed to negotiate a trade deal, Barnier also cautioned over state aid — or government subsidy — rules.
He said if Britain wants as much access as possible to the bloc's market after it leaves, it won't have unfettered freedom to subsidise its industry.
Barnier said state aid rules in any future trade deal would be more stringent than with nations like Canada or Japan, simply because of the physical proximity of the departing EU nation.
``"If the UK wants an open link with us for the products — zero tariffs, zero quotas — we need to be careful about zero dumping at the same time,``" Barnier told a conference in Stockholm.
`"I hope that this point is, and will be correctly understood by everybody. We will ask necessarily certain conditions on state aid policy in the UK,``" Barnier said, adding that if that is not the case, access to the lucrative EU market will be negatively affected.
The EU has been stressing the need for a level playing field in the upcoming trade deal negotiations, meaning that access will be strictly linked to commitments to social welfare and environmental standards, among others. On Thursday, he stressed the need for state aid limits too.
As a member state, Britain was bound by strict state aid rules enforced by the powerful European Commission to make sure there would be no unfair competition among EU nations in its vast single market. Third countries aren't immediately bound by such strictures.