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Ministers are working on the assumption that there will not be a deal, although it may be possible for a "basic" agreement to be reached if the EU gives ground in the autumn, The Daily Telegraph reported, citing government sources.
The newspaper added that the government expects to be trading on World Trade Organisation (WTO) terms when the transition period comes to an end. Since the UK left the EU on January 31, its relationship with the bloc has been governed by a transition arrangement which keeps previous rules in place while the two sides negotiate new terms.
Negotiations remained deadlocked this week on fishing rights, the deal's governance, the role of the European Court of Justice and so-called level playing field guarantees, the report said. A spokesperson for Johnson stated on Monday that the UK would continue to "engage constructively" with the EU in talks on a future relationship, but insisted London was not willing to give up its rights as an independent state.
The lack of progress comes after a major think tank warned many UK businesses were unprepared for the impact of a no-deal Brexit following the coronavirus crisis. The Institute for Government (IfG) announced last week that three out of five firms had not even begun to prepare for the end of the transition period amid ongoing uncertainty about the future relationship with the EU.
"Since the pandemic took hold in February, and with the formal lockdown taking effect in late March, government and business resources have been focused on responding to the pandemic, rightly prioritising this over Brexit preparations," the IfG said.
"Firms reeling from the economic consequences of coronavirus are poorly placed to prepare for Brexit: in many cases, in a worse position than in the months leading up to the potential no deal in October 2019," the IfG added.
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